> Sadly most people don't care nor should have to but the decentralization […]

"Decentralization"? Bank of America Global Research just released a report today that said:

> 1. Concentrated Ownership: About 95% of Bitcoin is controlled by just 2.4% of the accounts, and distribution is heavily skewed towards the largest accounts. By comparison, the latest Fed data suggests that the top 1% of Americans control about 30.4% of all household wealth in the US.

* Francisco Blanch, with Savita Subramanian, Philip Middleton, et. al. "Bitcoin’s dirty little secrets". BofA Global Research, 17 March 2021.

Probably not even Russian oligarchs have that much control.

> About 95% of Bitcoin is controlled by just 2.4% of the accounts

This seems obvious to me. Many people have bitcoin wallets with only a little invested. In my case, I have a few wallets just to play around with. I assume all of those wallets count as "accounts" in the above, which would really drive down the amount of money the average account controls. However few people actually have wallets with large amounts of money. I could easily move far more money into my wallets, but I choose not to.

On the other hand, when we're talking about non-bitcoin wealth the numerator is much larger (everything you and me have as assets could count as wealth, not just what we've invested in a specific thing) and the denominator would be much smaller (every one of us only counts as one person, while bitcoin wallets could be created on the fly)

In other words, the above is quite the apples to oranges comparison.

To expand on this, quite a few wallet apps nowadays default to using a fresh wallet per transaction as a privacy measure, further inflating the number of wallets relative to the monetary supply.

No, you are confusing "wallet" with "address". A wallet is little more than a seed for an RNG and a log of transactions. Every new transaction starts with a source address and results in two destination addresses: the primary destination (payee) address and the address where the remainder of the source balance goes. You definitely want to maintain control of your change, so your wallet uses the seed to deterministically generate a keypair for a new address and that is where your change gets sent.

I've got no interest in digging into their methodology, but feel pretty comfortable assuming that they've grossly misrepresented all of the above as "accounts".

i dont mean to be condescending, but how could they implement privacy without centralizing? like the bitcoin card provide must hold all your assets for you for you to gain privacy, no?

I believe they were talking about Bitcoin wallets, not card providers.

Is it worth for privacy even though transfer is trackable?

Many of those Bitcoin "accounts" (addresses) are probably exchange wallets that actually hold the Bitcoin of many users.

Since Bitcoin is somewhat anonymous it's hard to actually estimate its GINI coefficient. I agree that it's probably not great, but I'm not convinced it's this bad.

> About 95% of Bitcoin is controlled by just 2.4% of the accounts

Bitcoin doesn't have accounts. It was txouts, which have addresses attached. AFAICT they're counting this by address, which is silly: most wallets use each address once. So in practice, this means an average person who uses Bitcoin regularly will have lots of small value txouts as coins get split up. There is no reliable way to associate addresses to individual people.

On top of that, there have been spam attacks in the past that created large numbers of very small value txouts.

> There is no reliable way to associate addresses to individual people.

That may be true in general, however in the US there are several large companies that manage Bitcoin wallets for consumers that are public or trying to get public. So the US regulators will likely have been able to get aggregate statistics like this for some time.

The more nexus crypto has with the traditional regulated finance system, the more ability of regulators to get opaque data from the network.

They've been scrounging for a long time now, but have had little to show for it. Years ago I'd arbitrage between a handful of exchanges, keeping fiat only on those where I'd have a chance of legal recourse - and the bitcoin only showed up just in time to execute the order. So over the years a bunch of those exchanges have gotten popped by hackers, which means those transaction histories got sold on the carding forums. Interestingly enough, the only impact that had on me was a few Wall Street outfits reaching out to buy large blocks off-exchange. How'd they get my number, ya think?

Is there a similar statistic that only looks at 'active' coins. E.g. like giant giant blocks from the start that have never moved wallets.

I wonder what percent, of that 2.4%, have lost their password.

Satoshi's accounts alone supposedly contain nearly 6% of all bitcoin.

Those are exchange accounts that hold BTC for many people

What is a bitcoin account?

An address that owns Bitcoins.

Most BTC is held by an exchange, like Coinbase, Binance, etc... so this statistic is about as meaningful as pointing out that 95% of US dollars are stored at a bank.

A lot of BTC was held by an exchange like Mt. Gox and Bitfinex, too.

With banks I can trust that I can actually get my money bank. BTC isn't decentralised, and the central actors controlling the system are far less reputable (which is saying a lot, when they're being compared to bankers).

So that metric is really bad because almost every Bitcoin wallet only uses each address once, for privacy reasons. Most of those bottom 98% of addresses probably have very small amounts and are just a small part of someones wallet.

An "address" can mean anything - a person can have a wallet with multiple addresses, or an address could belong to an exchange with holds it on behalf of multiple people.

I mean... what do you expect with a currency with an annualized volatility of 100%. The risk is way too damn high.

I don't expect anything other than businesses will do what businesses do. Its just sad that mainstream media consumers will interpret this very differently from reality.

I think you're the one messing with reality here.

Bitcoin needs to be stable before it can be used widespread for transactions.

Visa doing this increases its adoption, increased adoption, even if used in this way will stabilise the currency.

That is huge. It's just a required stepping stone.

Not that huge. A lot of payment providers implemented bitcoin in 2017 and then removed it again.

It will be huge if it stays. But who wants to pay a 20$ transaction fee ( when it's a bit busy)

I ran across the following observation a little while ago: the volatility of one's currency should be less than the volatility of the goods purchased by that currency.

Sounds good, but does it hold true in practice? Should the average price of a dozen eggs be more volatile than $USD? I don’t think that’s the case historically.

Some goods are more volatile than others, and probably tend to be commodities (e.g., oil/WTI) rather than finished goods, but US$ (and the currencies of most developed economies) is less volatile than any good that I can think of.

which is more volatile, bitcoin or GPU hardware? ;)

What about other currencies? Stellar, Litecoin, Zcash, Monero, all the zillions of Ethereum tokens, and all the various other altcoins out there.

The tax treatment of crypto as an asset makes it hard to avoid, right?

Otherwise, you have to note the current price of coin in USD each time you use coin to pay for something, because you owe capital gains or losses on whatever currency you liquidated to make the purchase.

Presumably there will be tools to automate that, but I agree with you it would be a pita.

Visa has incentives to play by the tax rules and make it easy for the average consumer to spend Bitcoin in dollars. Most cryptocurrency credit card companies built on top of Visa aren't willing to get their feet wet, not even in the country they are operating in.

There are tax tools now. They cost $200+/year.

Isn't cryptotrader.tax free, or at least freemium?

A convincing argument would be a javascript app or a mobile or desktop app. I don't think the average person should be giving their address and personal information to a third-party.

Bitcoin disrupts central bank, not payment networks. Lightning [1] as layer 2 on top of Bitcoin adheres to trustless and p2p ideals, and is actually the competition for Visa.

[1]: https://lightning.network/

Edit: added link

I'm sorry but I just laughed like crazy reading this. The US Fed showering the wealthy with more cash than they know what to do with is the only reason Bitcoin continues to exist and anyone holds it. Bitcoin can't disrupt the Fed any more than house flippers in 2006 disrupted the mortgage underwriting industry. Bitcoin completely depends on the Fed. Holding it is a bet that the helicopter will never land.

I guess that's a little unfair as I suppose Bitcoin can help disrupt the central banks of places like Venezuela, giving the elite an easier means of fleeing a collapsing country without losing their wealth. Sort of defeats the purpose of economic collapse if it no longer even serves as a great leveler, but oh well, I guess. As long as the rich can never lose.

Zelle disrupts central banks more than Bitcoin in Venezuela.

https://www.bloomberg.com/news/features/2020-11-11/zelle-has...

"I lived in Venezuela. Almost no one uses crypto or cares about crypto. The fees to send bitcoin alone represent a sizeable chunk of money to most Venezuelans."

https://www.reddit.com/r/Economics/comments/jsw96e/zelle_has...

It looks like a single BTC transaction currently costs >10% of the average monthly income in Venezuela!

Lightning, technically speaking, is garbage.

10k transactions per second ETH2 layer 1 + zk roll-ups providing throughout multiplication threatens VISA.

I will cheer for the success of ETH2 as well. The reason I like Lightning better is because the engineer in me wants to freeze the base layer and do the experimental layers in isolation. Internet infra is all layered for good reason.

Ethereum is also layered. ZK Rollups are later two and not related to the Ethereum devs. It's an isolated engineering later with lots of experimentation going on with optimistic rollups, ZK Rollups, state channels etc.

The problem with Bitcoin is that it's not technically sophisticated enough to support proper L2s which results in poorly engineered solutions like Lightning and centralized solutions like Liquid.

With Bitcoin more work needs to be done on L1 for the ecosystem to support layers above it while Ethereum could freeze development forever and still support flexible, fast, and decentralized layers on top.

The OSI layering model of internet infra is largely a myth, a simplification for students. It's similar to C is called "portable assembly" despite compilers being far more complex in practice.

OSI layers 1, 2, 3, 4, and 7 are very real.

Roughly, e.g.: 1:Fiber, 2:Ethernet, 3:Routing, 4:TCP/IP, and 7:HTTP.

Layers 2 and 3 are not real - most networks today merge their functions in the same devices. (In the OSI model switches are illegal, you can only have hubs and routers).

4 and 7 are ceasing to be real - HTTP2 is both a session protocol and an application protocol, and that's before we even get into things like DoH.

You're not wrong, but you are speaking from the perspective of a single implementation stack, i.e. modern Ethernet and the modern Internet.

The model is still solid, even if the most common implementation has melted a bit.

I disagree. The model was supposed to be universal but it fell apart as soon as people started doing anything slightly unanticipated with it. It's simultaneously both overengineered and fragile, not providing enough insight to justify its complexity - rather like OSI itself. There's a reason their protocol suite was a failure in the real world.

That's fair and I agree that the OSI model is not useful for a precise understanding of deployed networking technology.

I do think it is useful as an architectural device or a conceptual design goal -- i.e. a model to model your models on. :)

But I also concede that part of its teaching value is that it is a failure in practice.

It was a formalization of the ad hoc (successful!) design strategies of early networking. I see echoes of it everywhere, most obviously in the Linux kernel, and I think it's valuable for that.

Isn’t IP commonly considered L3?

Yep, and TCP is L4. So TCP/IP is L4/L3.

The usual criticism of the OSI model is that there are grey areas and dependencies, where a lower layers bleed into higher layers (e.g. L2 switching which can work a lot like routing in modern hardware), and higher layers that are tightly bound to lower layers, making the distinctions unclear.

The purist in me wants to agree, but I think the model is too useful to disregard casually.

The value comes from the abstraction, and like Newtonian physics, it is a great model -- until it isn't.

> Lightning, technically speaking, is garbage.

Do you care to elaborate?

Sorry, 10k tx/sec on sharded ETH2 sounds really high to me, is that really the goal or a typo?

Zkrollups plus sharding will do more than that, without security or usability compromises. Rollups can handle a couple thousand tx/sec on Ethereum today and data sharding increases that by 23X initially.

https://vitalik.ca/general/2021/01/05/rollup.html

> Bitcoin disrupts central bank, not payment networks.

What central bank has been disrupted by Bitcoin?

Who would put his assets in a bank controlled by chinese miners and where you can literally lose your money.

Bitcoin is not a disruption. But blockchain is a useful tech.

Bitcoin is just an implementation of blockchain.

China is the disruption. China is where the big growth is happening. Just ask Charlie Munger.

And which numbers of that growth do you trust? :)

(just saying that you can't really trust their numbers, growing "big" or growing "normal". Who knows :) )

I trust Munger knows what he is talking about even though mere mortals like myself don't have the same network.

> Bitcoin disrupts central bank

no it doesn't

Fundamentally, we're stuck with conversion and middlemen until we have real products that are priced "natively" and stably in Bitcoin.

People aren't willing to say "this load of bread costs .00004534 BTC" because tomorrow it could be significantly less or more. And conversely, that reinforces the volatility, as there's no anchoring of BTC to real-world purchasing power.

So for the foreseeable future, we're looking at a conversion model and that requires someone to backstop.

So how do we create products priced in BTC? We can't even get, for comparison, shops pricing their goods in grams of gold or silver, a more stable alternative.

Just as with social media, convenience was more important than sovereignty via decentralization.

Can’t change the wind, have to adjust your sails.

I don’t fault the average person for not wanting to be their own bank. I’ve been using bitcoin for years and I’m still terrified I’m going to mess up a transaction or lose access to my wallet.

This is the biggest problem that an average person need not ever want to deal with. How do you explain to someone sorry we cannot help you because it was your responsibility to manage that wallet.

It's not really that decentralized now. The largest miner pools can be seen here[1]. All of the larger ones are from China. I would be more worried about authoritarian action over there than some by the book payment processor processing transactions in the US.

[1] https://www.statista.com/statistics/731416/market-share-of-m...

Why would a book payment processor use Bitcoin when the average Bitcoin transaction fee is about the same price as many new books? With Bitcoin, you're looking at spending about $50 if you buy a $25 book.

I meant the phrase "by the book" payment processor, not a book payment processor. I'm a lot less worried about the risk of centralization posed by visa than I am about over half of all bitcoins being mined in an authoritarian country.

> by the book:

> strictly according to the rules.

Ah, sorry, I misread your post.

It's impossible with current bitcoin transaction fees. Monero has a better chance at seeing real usage as currency.

The only problem with Monero (and most other privacy/decentralized related projects) is that there is a big illegal industry that desperately needs such a product and it needs it much more than any legitimate user so it has gained a Tor like reputation. The only ones who need superior privacy are those who have something to "hide", at least according to governments.

Why do we have to "need" privacy? That's completely backwards. It boggles my mind how people keep insisting on this argument. It's the government who needs an incredibly good excuse to even consider violating anyone's privacy. Authorities think they're justified in everything they do and are developing increasingly entitled attitudes towards personal information. They can't be trusted so we absolutely should lock them out and make it impossible to violate our boundaries.

Who cares if criminals use it? It doesn't matter at all. Technology doesn't choose its users. Governments wants to catch criminals? They need to send people out there to do real investigative and police work. We're not obligated to make it easy for them by making everything we do part of some public record.

Well, I mean, bitcoin isn't really decentralised... Not just because most of the circulation is held by a small number of accounts, and not just because most mining is heavily concentrated too. The real centralisation is the development of the client software. As long as that team can keep at least 51% of the network on their software, they can change the rules and control things as much as they want. Past experience has shown that trying to fork it doesn't get much traction, so the network remains basically entirely centrally controlled by the official bitcoin client's dev team...

That's quite a stretch. There are plenty of things beyond their control, like issuing new bitcoins

The layer 1 of bitcoin is decentralized. Adding multiple layer 2 solutions isn't centralization. People have choice.

Think of it like the currency equivalent of backwards compatibility.

It's meant to serve as a stopgap so that accepting bitcoin for a purchase doesn't require the friction/risk of only being able to use that bitcoin at other places that accept bitcoin.

If BTC could replace CC merchants in terms of their transaction volume than this would not be possible. However, because the transaction volume cannot be handled natively Visa is able to wrap the "decentralized" currency and profit by continuing to be a middleman.

Eth 2.0 has a lot of potential for high transaction thoroughput.

Yeah it would be different if Visa didn’t already have a history of blocking merchants they don’t like

Bitcoin for every day purchases is dead, it's averaging over 20 a tx these days and you need to open a LN channel which means maintaining that channel.

Bitcoin has been extremely resistant to any L1 scaling, so that's just the state of things.

I have recently started learning about nano coin... have you looked into it? It seems to be what you are talking about but perhaps it is also doomed to failure.

The problem with almost all alternative crytpo currencies is that somewhere deep down non-decentralized skeletons are burried. Either the protocol doesn't scale to more than a dozen validators, or there is some key node hosted by the devs (I think this is the issue with stellar).

Bitcoin literally wouldn't be able handle the transaction volume if individual transactions were being done in bitcoin. Even doing it this way I assume there's going to be delays and pretty big fees unless you load large amounts of bitcoin on to your card at once.

> the decentralization is effectively moot when payment processors like Visa get involved

It's a deflationary currency. If it has a future as a store of value, and I think it very well may, it would have a net effect of concentrating wealth. And with wealth comes power. Whether that power is exercised through how the blockchain processes transactions or via some other vector seems something of a side show to me.

The wealthy never wanted to abandon the gold standard. It was the populists and the bankers. The poor and the middlemen.

The only people I see campaigning for the return of the gold standard are populists.

> The only people I see campaigning for the return of the gold standard are populists.

Many of the current crop "populists" don't really have a program that would actually help the people whose support they've gained through emotional appeals. They're mainly just trying to harness dissatisfaction with the current order to fuel personal ambition.

IIRC, the original populists actually opposed the gold standard, when it was still actually a thing, and supported silver because it was more inflationary. They understood deflationary money helps the people who already have money, and inflationary money helps the people who are in debt to them.

> It's a deflationary currency.

It's not a currency, that's a misnomer to a great degree.

Which nations are supporting it as a currency? Essentially none. If something doesn't have the currency status backing of a single major economy, it plainly can't be considered a currency. It's a store of value.

Sure, we could be pretend about it (any medium of exchange), be idealistic, and say that you don't need nations to back something for it to be considered a currency, however that's repudiated by every possible aspect of how things actually work (and will continue to) both locally within an economy and internationally in trade.

Gold also is not a currency today, it's a store of value. I don't think anyone confuses gold for being a currency and there's no reason to confuse Bitcoin as being such.

> It's not a currency, that's a misnomer to a great degree

I agree with you. The comment was made within the context of (a) Visa treating it like a currency and (b) OP referencing the original dream of Bitcoin supporting a decentralized financial system.