[List] Ethereum and other smart contract L1s: How fair are tokenomics & launch?

[d5000]

I am investigating the tokenomics and launches of the so-called Ethereum killers, i.e. layer-1 blockchains with turing-complete smart contract capability.

The question is: how fair are these coins regarding the distribution of their initial supply?

I have developed a simple score for launch fairness. The higher the score, the less fair I consider (personally) the coin distribution. The score is composed of the following indicators:

- C: Coin supply after 1 year
- F: Founders/Developers allocation, as % of C
- I: ICO & Seed investment, as a percentage of C
- E: Ecosystem, as a percentage of C
- D1: Developer fee subtracted from block reward or transaction fees. Can be 1 (present) or 0 (not present). If present, then the score is duplicated, because this means a continuos dilution. Only applies if the developer fee is mandatory/hard-coded.
- D2: DAO or Treasury Fee, which goes from block reward or transaction fees to a DAO or another structure with minority founder participation, or to some kind of Treasury which can be used later but founders have no direct access. If present, the score is multiplied with 1.5. If there are both DAO/Treasury and developer fees, only the dev fee is taken into account.

The formula of the score is: ((F * 2) + I + E) * MAX(2*D1, 1.5*D2). That means that founders' reward has double weight, a high founder reward is thus penalized more by the score than an ICO.

I will start with the top Ethereum-style coins (those in the top 15), including Ethereum itself. Depending on interest, but very likely even if the interest is limited, I'll add more coins regularly. Company coins, like BNB, will be ignored. Coins with a higher score than Ethereum will be marked in RED, coins with lower score GREEN, and those very close to Ethereum's score (around +-10%) BLACK.

Those who like can propose other coins. Above all I'd be interested in coins with especially fair tokenomics, i.e. with a low score. Also if I made an error anywhere, I'm thankful for corrections & feedback!

Sources are: Cryptorank, ICOdrops, Coingecko. (In several cases I had to calculate the coins allocated in each founding round or to the team/foundation, so it's possible I made errors.)

(Last update: 2024-10-06: Added Sui and clarified an issue in the score formula, see item "D2" of the components.)

German Thread


Ethereum (ETH)

• Supply after 1 year: ~77M
• Founders' allocation: 11.9M
• ICO/Seed investment: 60M
• Developer fee: NO
• Score: 1.08 ((11.9M * 2) + 60M) / 77M

Solana (SOL)

• Supply after 1 year: ~260M (2021-04-10)
• Founders' allocation: ~66M
• ICO/Seed investment: ~188M
• Developer fee: 0
• Score: 1.2 ((66M * 2) + 180M) / 260M

Toncoin (TON)

• Supply after 1 year: (no data)
• Founders' allocation: (no data)
• ICO/Seed investment: (no data)
• Developer fee: 0
• Score: NO SCORE YET  

Note: TONcoin was distributed via a quite intransparent process (Gram token ICO, testnet tokens) and it's difficult to obtain exact data, it's also not clear what exactly can be considered the launch date. If someone has good data you can post them (with sources, of course).

Cardano (ADA)

• Supply after 1 year: 32.6B
• Founders' allocation: 5.15B 5.05
• ICO/Seed investment: 25.84B 25.9
• Developer fee: 0
• Score: 1.108  ((5.15 * 2) + 25.84) / 32.6

Note: One year after the launch Cardano mainnet was still not fully functional, so validation rewards had not been paid out yet.
Note 08-05: Recalculated with Coingecko data. Score is only very slightly higher.

Tron (TRX)

• Supply after 1 year: -
• Founders' allocation: 34%
• ICO/Seed investment: 66%
• Developer fee: 0
• Score: 1.34  (0.34 * 2) + 0.66

Note: Original allocation percentages were taken as the launch was as a token, so circulating supply wasn't taken into account.

Avalanche (AVAX)

• Supply after 1 year: ~220M
• Founders' allocation: 65M
• ICO/Seed investment: 104.2M
• Developer fee: 0
• Score: 1.06  ((65 * 2) + 104.2) / 220

Polkadot (DOT)

• Total supply after 1 year: ~1.1B
• Founders' allocation: 300M
• ICO/Seed investment: 650M
• Developer fee: DAO FEE
• Score: 1.70  1.5 * ((300 * 2) + 650) / 1100

See Notes in post below.

NEAR Protocol (NEAR)

• Total supply after 1 year: ~1.1B
• Founders' allocation: 354M
• ICO/Seed investment + Ecosystem: 473M
• Developer fee: NO
• Score: 1.18 ((354 * 2) + 473) / 1100

See Notes in post below.

Ethereum Classic (ETC)

As Ethereum Classic shared the launch with Ethereum, its score is exactly the same: 1.08.

Internet Computer (ICP)

• Total supply after 1 year: 481M
• Founders' allocation: 214M
• ICO/Seed investment + Ecosystem: 216M
• Developer fee: NO
• Score: 1.33 ((214 * 2) + 216) / 481

Tezos (XTZ)

• Total supply after 1 year: 804M
• Founders' allocation: 152M
• ICO/Seed investment + Ecosystem: 610M
• Developer fee: NO
• Score: 1.13 ((152 * 2) + 610) / 804

See notes in post below.

Aptos (APT)

• Total supply after 1 year: 1.07B
• Founders' allocation: 355M
• ICO/Seed investment + Ecosystem: 644.8M
• Developer fee: NO
• Score: 1.266 ((355 * 2) + 644.8 ) / 1070

See some notes here.

Stellar (XLM)

• Total supply after 1 year: 101B
• Founders' allocation: 20B (3B Development, 17B "Operating Fund")
• ICO/Seed investment + Ecosystem: 25.6B (25B Ecosystem, 600M ICO)
• Developer fee: UNCLEAR
• Score: 0.97 ((20 * 2) + 25.6) * 1.5 / 101

Stellar needs some additional explanations which are addressed in a dedicated post.

Sui (SUI)

• Total supply after 1 year: 2.3B
• Founders' allocation: 1.836B (Early Contributors 613.37M, Community Reserve 1.06B, Mysten Labs Treasury 163.48M)
• ICO/Seed investment + Ecosystem: 1.991B (Series A 714.17M, Series B 695.56M, Community Access Program 582M)
• Developer fee: NO (but see notes about unlock schedule below!)
• Score: 2.46 ((1.836 * 2) + 1.991) / 2.3

See notes for Sui here.


Important: This is a personal opinion and not investment advice. In the case of a bad score it is still possible that a project is good to invest in, if it's transparently and responsibly managed. It is possible that it cointains errors, mainly because the projects aren't exactly eager to communicate their premine tokenomics transparently and often I had to calculate the proportions between the premine categories myself. In the case you discovered an error, please comment in this thread.

[nullCoiner]

great idea, had immediately asked myself about ADA, can't wait for i.e. Tezos I'm happy that Avalanche has the lowest score so far. I'm sure it won't always be easy to find the data. What is also important in my opinion is whether there is a max supply or “someone” can mine new coins at any time, I don't want to start a fundamental discussion here, but maybe a hint or factor would be good.

[betswift]

Thanks for such an interesting post! I will look for updates or discussions from time to time. Or maybe try to search for data about TON, as it's on the ears lately.

[d5000]

I added Polkadot and NEAR and also mentioned ETC (which has the same score than ETH).

Notes for Polkadot:

Polkadot had two private sale rounds after launch with about 83M tokens distributed this way, and there are also undisclosed rounds ("Future Sales"). These are included in the "I" figure.

Polkadot has a "Treasury" fee. This fee doesn't go directly to the founders but the expenditures are voted by a DAO. I apply a 1.5 factor for this "DAO treasury tax" instead of 2 for a full-fledged dev fee (see explanation below).

Notes for NEAR:

There is a category in the initial allocation which could be evaluated differently called Community Grants, Programs (170M). I chose for now to not include the Community Grants into the score, even if the Community Grants in other coins may be one of the tasks of a "Foundation".

Next round will be ICP (Internet Computer) and, per suggestion by nullCoiner, Tezos (TZ) even if it's much lower on the Coingecko/Coinmarketcap rankings.


I made also two small additions to the score:

First, there is a new category called "Ecosystem", which gets the same weight than ICO/Private Sales, if present. These are funds which are paid to external developers to develop applications for the coin. As these funds are separated from the founders' and Foundations' allocations, they can be described like a "barter" ("work for coins"), so they're a bit similar to a Private Sale.

Second, the Developer/Treasury fees can have the value of 2 (like originally), when the fee is allocated directly to the founders or the foundation or 1.5 if it's allocated to a DAO where the participation of the founders is minoritary.

There were some suggestions in the German forum to change the score to "normalized" values between 0 and 1. I'm considering that but I have to think about how to implement the weights and the "penalty" for dev fees correctly.

[d5000]

Added Tezos. It is further down the rankings than some other chains (currently at #101 at Coingecko), but it was desired by user @nullCoiner.

Tezos had a fairly standard distribution: 80% of the initial supply was ICO (and a very small private sale), 10% went to the Foundation and 10% to a company called Dynamic Ledger Solutions (Source: Tezos Tokenomics explained and CryptoRank).

As so often, neither the Tezos website nor the most popular block explorers provide a transparent chart for the total supply. So as in some other coins already I calculated the supply dividing the market cap at Coingecko one year after launch by the price at that moment. This method is error prone but I'm also not providing a very fine grained index here, and the number of 804 million XTZ looks reasonable for 2019 taking into account the current supply is slightly above 1 billion.

Tezos score seems to be standard so far, only slightly above Ethereum.

[d5000]

Added Aptos and Stellar.

Aptos is a fairly standard smart contract blockchain, derived from Facebook's Libra/Diem project. It's not EVM compatible but uses the Move language which is a bit less expressive than Solidity (for security) but Turing complete as it seems. The project at least was relatively transparent about its token distribution. However, the distribution itself tends to the less fairer side according to my score, as the allocations to the project itself were quite high (abot 35%).

Stellar is a quite complicated case and the oldest coin in this list so far, Turing-complete functionality was only very recently added.

The launch was done in the following way: 50% of the initial supply of 100 billion were reserved for airdrop programs (which aren't "penalized" by my score). 25% were for partnerships (ecosystem). Only 0.6% were for an ICO, and only 3% for the Founders/Project/Development, but 17% for an "Operating Fund", so about 20% went to the project. As there was 1% inflation initially, the supply after 1 year was only slightly higher than at the start. That looks straightforward and relatively fair.

However, there are two catches. First, the airdrops are centrally organized by some partners, so it could be fair to add them to the Ecosystem category. But only 4 billion were distributed that way at the end (see below).

Second, in 2019 the tokenomics policy was changed drastically. About 37B from the tokens reserved for airdrops were burnt, as were 13B from the Ecosystem (Partnerships) program, and 4B from the Operating Fund. This reduced the supply to about 50 billion.

Third, there is a part of the transaction fee which goes to a fund but cannot be used at the moment, but it seems it is also not really burnt. Is this a "dev fee"? At least not in the classical sense. So I applied the "reduced" penalization for a "DAO fee" of 1.5.

tl;dr: Take the relatively low score for Stellar with a huge grain of salt.

PS: If someone knows a link explaining where the Stellar fees go, i'd be thankful

[d5000]

Sui has continuously grown in the last months, getting close to its ATH, and has already surpassed some of the other projects I have covered so I'll analyze them today. It's a coin which uses the Move language, like Aptos, which was originally developed for Facebook's Libra coin.

Sui has a particularity which makes it a bit difficult to fit in the above scheme: the founders' and investor's premine is unlocked during several years (until 2030) as it can be seen in this graph. Sui is not very transparent about the numbers of tokens which will be unlocked after 2030. So the question was: how can we know the final allocation to founders/investors? Or can this kind of distribution qualify as a permanent "dev fee"?

I decided to not use the "dev fee" figure, because the maximum supply of Sui is capped at 10B, and instead using the numbers provided at CryptoRank for 2030. (Edit: That 2030 seems to be the end of the currently planned schedule is also confirmed on Sui's website.) Even if we don't apply a dev fee penalty, the score is one of the worst of all blockchains covered in this thread. The categories used on Cryptorank are categorized here as followed according to the scheme described in the OP:

- Founders: Early Contributors, Community Reserve (Foundation), Mysten Labs Treasury
- ICO/Investors: Series A, Series B
- Ecosystem: Community Access Program

Putting the "Community Reserve" in the "Founders" category may be controversial, but as described on the Sui website, this category includes typical tasks of the foundation, and as in all other coins Foundation allocations were also counted as part of the "Founders" category (because basically the founders can decide what to do with them) so it is appropiate to do the same thing here.

I was even a bit generous to apply the "supply after one year" number to the circulating supply after the April 2024 mega unlock event. If I didn't do this, the score would have been around 80% higher.

[werghb4562]

These numbers are dubious. There is no way to verify that the founders did not increase their allocation by buying from their own sale for free in an underhanded manner.

[d5000]

These numbers are dubious. There is no way to verify that the founders did not increase their allocation by buying from their own sale for free in an underhanded manner.

Yes, this is true. This is one of the reason why in my score the blockchain projects are actually penalized for large ICOs.

In theory I would need to penalize them for airdrops too, because they have the same problem. But on the other hand, we also don't know how many validator nodes are operated by the founders. So the score will never be really "perfect". It's a rough approximation to the fairness of a launch.

The "ideal" score according to the rules lined out in the OP would be a coin where no ICO and no developer allocation has taken place, but all the coins are distributed via validator/miner rewards.

However, ICOs give "normal users" at least a small opportunity to benefit from the value increase of a coin, even if it is by no means sure if such a value increase will occur. So I think it is appropiate to penalize projects a little bit less for ICOs than for the funds they allocate entirely for themselves or for their "Foundation".

An alternative approach I had in mind previously was to simply penalize coins for the total amount of the premine. But I didn't follow this approach because first, some coins are (almost) 100% premined and if they are 80% or 90% premined doesn't really make a difference. On the other hand, I think the difference I explained above matters, i.e. if "normal users" can benefit from a value increase or not.