The Wealth Distribution of Bitcoin Will Most Likely Follow the Distribution of the Real World
There is a common misconception that a majority of the people that are super rich are going to get displaced if bitcoin and other cryptocurrencies become worth a massive amount of money. However, in reality the way that wealth distribution works is some people will get insanely rich, but the vast majority of people will end up just getting rich and selling their coins to people who are extremely wealthy now. Due to many of us having much lower opportunity costs (Many of us might cash out if we had a few million in coins, while people who have billions of dollars wouldn’t ever cash out), it makes sense that the majority of people buying will be people who had money before bitcoin.
Even now if we look at the people who have a massive amount of bitcoin like Brock Peirce, the Drapers, Winkelvoss twins, ect. They already had a fortune before bitcoin even came around so they were able to freely invest and gamble a million or more in the early days just in the case that it was successful. As much as we want the wealth distribution model to change, bitcoin most likely will not be the mechanism that changes it.
That being said bitcoin will make some people poorer in the grand scheme of all the wealth if they choose to not invest at all and many people move money from other assets into it. But like I said before, these people are most likely already wealthy and losing out on another twenty million dollars really wont be a huge hit to them or their future. They already have a level that will sustain them and their family for the rest of their lives, so it makes little difference.
There will definitely be outlier cases of people who people insanely wealthy, like Roger Ver, but im just talking about the average person who invests. Like I said before, it doesn’t mean that you cant make a ton of money and secure financial freedom for yourself and your loved ones, that is definitely possible. However many people saying this will be the biggest wealth transfer in human history aren’t correct.
The reason so many people keep saying institutional money isn’t here is because we would know it if it were. These people with millions of dollars who want to purchase coins so they can be involved in the space will start flocking in, at the advice of their financial advisers. It will waterfall at that point and we will know. This is why I usually say try and not sell all your coins or sell as few as you can and just live a normal life because people have a bad time estimating exponential growth. There is a chance we can be very wealthy so lets do our best to avoid the rich gobbling up crypto like they do every other asset. It will still happen, but it happens more if we sell on fud and other short term news.
Thanks to @Elyaque for the badges
There's also another aspect of cryptos that needs to mentioned here: preservation of purchasing power. Even if the average Joe doesn't get rich from holding cryptos, he/she will still benefit substantially from the preservation of purchasing power, which is not the case with the USD!!
Yes I like deflationary currencies that can be used and easily spent and transacted with, even if we have to use third parties like bitpay. I want the USD to continue to exist so people can have options.
Well said!
More choice and competition in the space will ultimately benefit the individual user the most. That's what real freedom is after all: choice!
Pure chance makes the rich fewer and richer and the poor more and poorer. Yes, that is mathematically proven.
That is one of the reasons why you need high inheritance and a wealth tax, to give the money back.
Absolutely. We should be buying and holding cryptos until the price equalizes, which could be years from now. Obviously you have to live, but I would definitely recommend keeping as many of your cryptos as you can. This whole space will go much higher in the long run as adoption rates increase.
Love to hear words by a pragmatist rather than the typical idealists that abound here. Well done post sir!
I totally agree with you.
Thanks I appreciate it!, Ill admit sometimes I do a topic that I have a biased opinion on, but I try and post things that are semi grounded.
What about crypto making use cases for basic income more practical?
For example one of the major concerns about basic income is that people will spend money on irresponsible things, but with smart contract tied cryptos, basic income payments could be restricted to certain purchases (yes there is still some room for abuse, but it's one layer more difficult).
That is to say even if bitcoin or any given crypto will mirror the current structure (agree seems very likely), blockchain technology itself will allow overcoming some of the largest concerns voiced about wealth distribution
I think with crypto or not we will probably have to move toward Universal basic income. When you have a large percentage of the population out of work, they start to riot and destroy things. I think rich people regardless of who they are would rather pay more in taxes, live relatively the same way and not have to worry about having their property burned down.
Hi very well thought blog..
But that is the rule of the nature..
Only less than 10% of the population would be extreme rich..
90% would be still poorer... nature of sub conscious mind...
The rich one knows the nature and continue to monopoly the poorer... the poorer blame faith, other ppl, and thinks they are destine to be poorer... can't change that...
But from your blog post already observe, that you have cultivated the mindset of being richer.. hats off and kudos to you...
May God Bless you and good luck on your future endeavors..
Would follow, upvote and resteem your post.. thank you
Yeah, the rich have only really gotten richer because of what happened in 08 so they arent going to be displaced. Those who have cash and money to invest continue chugging along.
Good point. The issue of rich or poor is really a mental one. A poor person cashes out fast because they have not seen riches like that before and rich people much slower because they already have the riches before BTC. Comes down to... are you willing to live a simple life, restricting yourself from the privileges of the wealth you do have, just so that you can never be poor again? Do the math. How much do you need to never worry again according to the lifestyle you want to live. Everyone cashes out at the point they believe they hit that point. But many calculate wrong and end up poor again. Checkout 90% of the lottery winners. Money enhances what you already believe and spend like.
yeah we all have a different opportunity cost for what we consider rich or consider an amount we can take out and live on. People who saw this price rise and are 60 years old might say "screw it i can pull my money out and live the rest of my days on it."
I think a common missconception is that everyone will be rich form investing in btc. The whole point is that BTC and other cryptos will be a great equalizer in the long run. It breaks apart the current system and gives everyone more of an equal chance.
The real change comes when more people start earning in BTC. When there are more decentralized businesses, no more regulation to protect monopolies. This is what will make a difference, but it will take time and effort.
So what if at any time all countries in the world declare bitcoin as an illegal currency for any country? Are they going to go free and become something they never thought of before?
Its near impossible to actually make transacting in bitcoin illegal, just the nature of how it works, but it would probably hurt legal investment from that country.
That would never happen. How much agreement do you see in "all countries" in anything? Bitcoin will become even more profitable for a country to incentivise it the more it's made illegal. It won't and cant be done.
I have to say that you talk a lot of sense on this post. Money has always created more money. What we do have the chance to do is to spread the wealth more evenly and stop a lot of it being hoovered up by the large banks and investment funds. Having money and technology easily accessible to the masses can only be a good thing as long as nobody gets too greedy or risks it all. As for the billionaires, they will always be there.
Money creates more money but when used that way money is just the fuel, you still need an engine.