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The only way you could possibly measure this is just to look at the distribution of coins among wallets. This is obviously going to count crypto exchanges as si

by darawk 4y ago

The only way you could possibly measure this is just to look at the distribution of coins among wallets. This is obviously going to count crypto exchanges as single entities, which is absurd. It'd be like counting JPMorgan as a single person when computing wealth inequality in the US. Analyses like these are a total joke.

id 4y ago
In the world of crypto, where people keep repeating the "not your keys, not your coins" mantra, crypto exchanges are very much the owners of all the coins they hold. But I agree, it's absurd.
- netsharc 4y ago
  Ironically their customers trust them because just like other businesses around the world, the customers rely on the jurisdictions of where the exchanges are incorporated to uphold the law and make sure the exchanges don't rob them. The same jurisdictions many crypto-diehards think need to disappear... Would you trust an exchange name "Uncle Vlad's Russki Crypto Exchange"? Probably not, right? Because if they take your money, and you call the Russian version of the FBI, they'll just laugh at you. So you think your money is safer in a crypto exchange where the founders would be arrested if they blatantly stole your money...
  - shuntress 4y ago
    This is the main thing that has always seemed odd to my about much of enthusiasm for crypto. People seem to conflate "it works like physical cash but it's electronic" with "no banks no laws no regulation" when its very obvious that banks and governance are still necessary.
deleted 4y ago
[deleted]
bogota 4y ago
Not to mention how to determine what coins are lost forever. I know of several addresses that are mine but the keys are unfortunately lost forever. And additionally you might have coins that haven’t moved in 8 years that is considered lost but i just haven’t had a reason to move them. Im sure someone could come up with a decent methodology for figuring this out but this isn’t it.
buzzdenver 4y ago
Not that much of a joke if you consider that crypto is supposed to be decentralized and permissionless in opposition to fiat that the banks hold.
- thevardanian 4y ago
  I really don't understand why people don't get the idea of "digital native". Just because verbal agreements worked for thousands of years doesn't make written contracts pointless. Similarly the banking industry technically does "online banking" but they still have to process each transaction through archaic practices that mimic physical transactions.
  - buzzdenver 4y ago
    Sorry, I'm not following how what you posted related to my comment.
    - rglullis 4y ago
      Let me take a crack at interpreting it: your comment of "crypto is meant for decentralization, lots of people use exchanges, exchanges are centralized like banks, ergo crypto is just as bad as the legacy financial system" presents a false dichotomy. Crypto adoption does not need to be a binary decision, and crypto enthusiasts are not hypocrites if they still have a bank account or if they still use exchanges when it suits them. The important thing about crypto is optionality. Crypto/web3 gives us the option (but not the obligation) of managing our own wealth. This is something that "digital natives" understand better than old timers.
      - andsoitis 4y ago
        > Crypto/web3 gives us the option (but not the obligation) of managing our own wealth. This is something that "digital natives" understand better than old timers. Before crypto/web3 one couldn't manage one's own wealth? C'mon.
FabHK 4y ago
> The only way you could possibly measure this ... > This is obviously going to ... > Analyses like these are a total joke. Why is this obviously so? Watching the video, one realises that they refer to a WSJ article that is based on a 2021 NBER paper [1]. Do you think that the NBER, London School of Economics, and MIT harbour idiots that have not heard of exchanges? On page 5 of the paper: "Determining the concentration of ownership is more complicated than just tracking the holdings of the richest addresses, since many of the largest addresses belong to cold wallets of exchanges and online wallets, which hold Bitcoin on behalf of many investors. We develop a suite of algorithms based on graph analysis to classify addresses into those belonging to individual investors or those belonging to intermediaries. [...] We show that the balances held at intermediaries have been steadily increasing since 2014. By the end of 2020 it is equal to 5.5 million bitcoins, roughly one-third of Bitcoin in circulation. In contrast, individual investors collectively control 8.5 million bitcoins by the end of 2020. The individual holdings are still highly concentrated: the top 1000 investors control about 3 million BTC and the top 10,000 investors own around 5 million bitcoins." [1] https://www.nber.org/papers/w29396 https://www.nber.org/papers/w29396 [meta note: had to revise this post several times before posting to comply with HN guidelines.]
- MrPatan 4y ago
  > Do you think that the NBER, London School of Economics, and MIT harbour idiots that have not heard of exchanges? Not idiots, just people who want to publish something that will turn into a juicy headline, and don't care much about how closely it aligns with reality.
- darawk 4y ago
  This is theoretically a fair criticism. But note that the 27% vs 0.01% never appears in the NBER paper. Further note the extreme limitations of any clustering based analysis. And finally, note that they do not actually identify individuals, they identify clusters, and they also treat mining pools as individuals. I see no support for the headline number in this paper. What it appears that the people making this video did was take "1000 individuals" (which the paper defines as clusters of wallets) and divide by 68 million wallets in existence. What you actually get here when you do this is 0.001% vs 16%, which is reasonably close to the figured cited in the video, so is likely essentialy the calculation they did. It should be obvious how absurd this is. EDIT: Hah, actually the exact calculation they did is 10k/68mm and 5mm/18mm. That gives you exactly 0.01% and 27%. Discrepancy resolved. This is the exact ludicrious calculation the people in this video did.
latchkey 4y ago
It also does not consider wrapped bitcoin... this is just on ETH... but it is on all the various L2's as well... https://wbtc.network/dashboard/order-book https://wbtc.network/dashboard/order-book
- cuteboy19 4y ago
  It does consider it actually. WBTC is offchain but the btc it corresponds to is still on chain though it may be miscounted as the custodian wallet. From the perspective of btc, not your keys not your coins still applies and those coins belong to the custodian wallet, not to WBTC holders.
asah 4y ago
Also, Satoshi's wallets
krzyk 4y ago
Some (if not all) exchanges have normal addresses for bitcoin, each client has a bunch of them. For example coinbase has that.

by darawk 4y ago

id 4y ago

In the world of crypto, where people keep repeating the "not your keys, not your coins" mantra, crypto exchanges are very much the owners of all the coins they hold. But I agree, it's absurd.

netsharc 4y ago
Ironically their customers trust them because just like other businesses around the world, the customers rely on the jurisdictions of where the exchanges are incorporated to uphold the law and make sure the exchanges don't rob them. The same jurisdictions many crypto-diehards think need to disappear... Would you trust an exchange name "Uncle Vlad's Russki Crypto Exchange"? Probably not, right? Because if they take your money, and you call the Russian version of the FBI, they'll just laugh at you. So you think your money is safer in a crypto exchange where the founders would be arrested if they blatantly stole your money...
- shuntress 4y ago
  This is the main thing that has always seemed odd to my about much of enthusiasm for crypto. People seem to conflate "it works like physical cash but it's electronic" with "no banks no laws no regulation" when its very obvious that banks and governance are still necessary.

deleted 4y ago

[deleted]

bogota 4y ago

Not to mention how to determine what coins are lost forever. I know of several addresses that are mine but the keys are unfortunately lost forever. And additionally you might have coins that haven’t moved in 8 years that is considered lost but i just haven’t had a reason to move them. Im sure someone could come up with a decent methodology for figuring this out but this isn’t it.

buzzdenver 4y ago

Not that much of a joke if you consider that crypto is supposed to be decentralized and permissionless in opposition to fiat that the banks hold.

thevardanian 4y ago
I really don't understand why people don't get the idea of "digital native". Just because verbal agreements worked for thousands of years doesn't make written contracts pointless. Similarly the banking industry technically does "online banking" but they still have to process each transaction through archaic practices that mimic physical transactions.
- buzzdenver 4y ago
  Sorry, I'm not following how what you posted related to my comment.
  - rglullis 4y ago
    Let me take a crack at interpreting it: your comment of "crypto is meant for decentralization, lots of people use exchanges, exchanges are centralized like banks, ergo crypto is just as bad as the legacy financial system" presents a false dichotomy. Crypto adoption does not need to be a binary decision, and crypto enthusiasts are not hypocrites if they still have a bank account or if they still use exchanges when it suits them. The important thing about crypto is optionality. Crypto/web3 gives us the option (but not the obligation) of managing our own wealth. This is something that "digital natives" understand better than old timers.
    - andsoitis 4y ago
      > Crypto/web3 gives us the option (but not the obligation) of managing our own wealth. This is something that "digital natives" understand better than old timers. Before crypto/web3 one couldn't manage one's own wealth? C'mon.

FabHK 4y ago

> The only way you could possibly measure this ... > This is obviously going to ... > Analyses like these are a total joke. Why is this obviously so? Watching the video, one realises that they refer to a WSJ article that is based on a 2021 NBER paper [1]. Do you think that the NBER, London School of Economics, and MIT harbour idiots that have not heard of exchanges? On page 5 of the paper: "Determining the concentration of ownership is more complicated than just tracking the holdings of the richest addresses, since many of the largest addresses belong to cold wallets of exchanges and online wallets, which hold Bitcoin on behalf of many investors. We develop a suite of algorithms based on graph analysis to classify addresses into those belonging to individual investors or those belonging to intermediaries. [...] We show that the balances held at intermediaries have been steadily increasing since 2014. By the end of 2020 it is equal to 5.5 million bitcoins, roughly one-third of Bitcoin in circulation. In contrast, individual investors collectively control 8.5 million bitcoins by the end of 2020. The individual holdings are still highly concentrated: the top 1000 investors control about 3 million BTC and the top 10,000 investors own around 5 million bitcoins." [1] https://www.nber.org/papers/w29396 https://www.nber.org/papers/w29396 [meta note: had to revise this post several times before posting to comply with HN guidelines.]

MrPatan 4y ago
> Do you think that the NBER, London School of Economics, and MIT harbour idiots that have not heard of exchanges? Not idiots, just people who want to publish something that will turn into a juicy headline, and don't care much about how closely it aligns with reality.
darawk 4y ago
This is theoretically a fair criticism. But note that the 27% vs 0.01% never appears in the NBER paper. Further note the extreme limitations of any clustering based analysis. And finally, note that they do not actually identify individuals, they identify clusters, and they also treat mining pools as individuals. I see no support for the headline number in this paper. What it appears that the people making this video did was take "1000 individuals" (which the paper defines as clusters of wallets) and divide by 68 million wallets in existence. What you actually get here when you do this is 0.001% vs 16%, which is reasonably close to the figured cited in the video, so is likely essentialy the calculation they did. It should be obvious how absurd this is. EDIT: Hah, actually the exact calculation they did is 10k/68mm and 5mm/18mm. That gives you exactly 0.01% and 27%. Discrepancy resolved. This is the exact ludicrious calculation the people in this video did.

latchkey 4y ago

It also does not consider wrapped bitcoin... this is just on ETH... but it is on all the various L2's as well... https://wbtc.network/dashboard/order-book https://wbtc.network/dashboard/order-book

cuteboy19 4y ago
It does consider it actually. WBTC is offchain but the btc it corresponds to is still on chain though it may be miscounted as the custodian wallet. From the perspective of btc, not your keys not your coins still applies and those coins belong to the custodian wallet, not to WBTC holders.

asah 4y ago

Also, Satoshi's wallets

krzyk 4y ago

Some (if not all) exchanges have normal addresses for bitcoin, each client has a bunch of them. For example coinbase has that.