Ryan Sean Adams, founder of Mythos Capital, calls the initial token distribution plan that prioritizes insiders the “ineffective” Ethereum killer:
Source: Twitter
Adams is referring to a recent Messari report that summarizes the token distribution of some of the most popular Ethereum (ETH) alternatives launched in the past few years. There are four main distribution methods: public pre-sale, community distribution, internal personnel, and each project’s own foundation.
Source: Messari
The author of this report suggests that when evaluating projects, the proportion of tokens allocated to internal personnel (including teams, companies and venture capitalists) is very important. “To the internal personnel (team, founders, (And venture capitalists) projects that distribute tokens will put themselves at a disadvantage.” They also compared the token distribution of these other projects with Ethereum:
“Ethereum succeeded because it made early investors wealthy. But it thrived because of the large number of early contributors.”
In addition, the authors stated that all these blockchains (except Kadena and Nervos Network) have adopted a proof-of-stake consensus, which they believe will only worsen the problem:
“After the issuance of Ethereum, it is a difficult task to rebalance the ownership ratio of insiders to the community network. For Proof of Stake (PoS) networks, this may be more difficult because early stakeholders have been Have the right to claim”
The report pointed out that, for example, Placeholder Capital prefers to allocate 20% to 30% of the token supply to projects within the project. The average of the twelve platforms mentioned above is 43%, and only Kadena and Edgeware meet the specified standards.
For a long time, people have been discussing ways to ensure the fair launch of new cryptocurrency projects. Although Messari and Adams seem to praise Ethereum, Bitcoinists will quickly point out that most of Ethereum has been pre-mined. Others might think that Satoshi Nakamoto succeeded in mining a fortune in Bitcoin in an environment with little competition.
In this case, the problem is more about determining which allocation type can provide the best results for the project. There is an opportunity cost for large allocations to internal personnel. These tokens can be used to motivate the community. In addition, insiders usually get tokens for free or at a steep discount, which allows them to sell tokens in advance, thereby driving down prices. The subject of the entire token economy is quite new, with almost no empirical data or academic research. This makes it difficult to draw meaningful conclusions and may be affected by subjective interpretation.
