hang on guys... so 10% of the coins will be sold in the ICO? 90% held back, where 70% will be used "in the future". Can you guys elaborate on that a bit? I'm interested in this project, but not while only 10% of the supply is circulating. I also suspect this will prevent quite a few exchanges from getting involved. Maybe I didn't understand this proposed distribution... can anyone help me with that? I'm likely to wait until more than 60% of the supply is out there to jump in, but good luck on your project! (hello from NEM Xtester)
There is no scheme of distribution, that will make everyone happy. No matter what we do, some people will complain.
Distributing 30% of the coins at once, like Ethereum did, is a mistake (for various reasons). We spent a year evaluating different methods and a slow tapered, Bitcoin like distribution was the best option. This means a constant rate of new coins being released on to the market over time, with that number decreasing over time.
However we have not determined the optimal rate yet. We need to find an empirically good policy.
We have to do this by hand, because of the way the coin is designed. No coins are created or destroyed when new blocks are created, which simplifies the mathematical structure of the blockchain and makes it cleaner, but it means all the coins are created in the genesis block.
So there are two separate issues
- are coins distributed and put into circulation gradually
- are coins put into distribution all at once, with a giant crowd sale
We chose a hybrid of a small crowd sale and then bitcoin like distribution schedule, as being optimal
The other issue is
- are coins put into circulation by automatic mechanisms such as blockchain rewards
- are coins put into circulation by hand, by the developers
If the developers put the coins into circulation, then it requires more trust in the developer . However, if distribution is driving down the coin price, then the distribution can be cut back to protect the earlier investors. Otherwise, the coin price would be eternally decreasing, so everyone would dump the coin because the price is going down at a constant rate for a persistent amount of time and the rate of new coins cannot be cut back because its an automatic part of the block reward.
Where as, we can cut back distribution (because we are forced to do it by hand), to avoid this.
It is not perfect, but this was the best system and policy we found.
The distribution rate the market can sustain, reflects how well the development, marketing and community growth is going. So if those are doing very well, it means we can sustain a larger development effort. And if not, then we can scale back and the coin will still survive and appreciate.
It is simply impossible to choose an optimal, automatic and preset distribution rate parameter, because it depends on empirical things outside of the blockchain itself. No matter what the developers set the parameter to at launch, it will end up being either too high or too low.
A very important thing, is that no one actually cares how many coins there are or how many have been distribution. People only care
- how many coins they own
- what the price per coin is
So if you have 25,000 coins and you bought them at $0.10 and the price goes to $50, then you made 500x. The investors only care about the price per coin.
So we are focused on the price per coin metric. If we distribute too quickly, then it would drive down the price per coin. So it our opinion is better to keep the coin supply tight, than to dump a massive number of coins on the market (like byteballs and stellar did).
If the number of coins in circulation doubled, from 5 million to 10 million. It does not matter, because they made 500x. There is a multiplier for the impact of putting new coins into circulation, for effect it has on coin price
- if 100% coins are dumped for bitcoin, then every dollar of coins put into circulation will end up in the capital outflows for the coin (driving price down). This is what happens when people GPU mine shitcoin and the miners instantly dump every coin they earn for Bitcoin.
- if new coins are going to people that are driving improvements, community growth, development, marketing then every dollar of coins distributed, can produce multiple dollars of direct and indirect new capital inflows, driving the price per coin up faster than the inflation caused by new coins (This is what we want to see for Skycoin and what will determine how aggressive the distribution rate is)
We do not have a simple distribution strategy, because it depends on what we are trying to do.
- if we are trying to raise funds for development, we will do an ICO for bitcoin
- if we are trying to get people to run nodes, we will allocate 1% as bonus to be distributed over people running nodes
- if we are trying to get apps developed for the network, we will allocate coins as bounties for high priority apps to drive growth
- if there is a crash and we want the price per coin to recover quickly, then we might cut back distribution rate
- etc
As long as the distribution schedule protects the price per coin, then no one will complain
We also tend to do small experiments. Smaller ICOs, testing bounties. We never plan do Ethereum/Stellar/Byteballs style distributions, where a large number of new coins come on to the market at once. We want to do smaller tests and if they work, then do more of that.
