Creating a Fair Launch for New Tokens

One of the most powerful ideas in crypto is that of the fair launch. Satoshi Nakamoto’s initial construction of Bitcoin had the powerful property that there was no venture capital or surge of up-front interest backing the project. This allowed the project to bootstrap itself organically. In theory at least, any interested party could have obtained Bitcoin by mining. Many newer projects have alternate structures where most tokens are sold to investors in discounted deals that ordinary investors can’t join.

For this reason, Grin’s recent launch drew a lot of attention since the developers explicitly aimed to recreate the aesthetic of Bitcoin’s launch. Grin’s founders and core devs are pseudonymous and the launch was fair by construction where any party capable of mining could join in on the effort. A number of interested crypto community members joined in. (I’ve met at least a few people who claimed to have netted one of the first Grin blocks mined.) However, we no longer have the vacuum Bitcoin launched in. As a result, Grin gained a large amount of attention from the investment community well before launch, and the coin launched with significant amounts of hashpower from crypto VCs and developers. There’s nothing wrong with this per se, but it did mean that it was harder for enthusiasts to participate in the gold rush since professionals entered the race early.

The fact that the Grin launch was a gold rush is also worth digging into. The early rush of interest paradoxically meant that the core developers were left without much support themselves. Ignotus Peverell (one of Grin’s pseudonymous founders) posted a note that he was disappointed with the community for failing to fund one of the core developers with a minimal salary. Although the community did step up to source the needed funds, I think the situation highlights one of the challenges with a fair launch. Consider the traditional shape of mining reward curve

In this curve, early adopters are rewarded with the greatest amounts. For Satoshi’s initial design, this bootstrap was needed since Bitcoin was a radically different concept. However, in today’s climate, there exists a surplus of early stage interest, but a dearth of long-term support. There are many early adopters who are willing to join for the first part of a new coin’s journey in hopes of future profits. However, as block rewards drop over time, many early adopters drift off to greener pastures or newer projects. The structure of the curve encourages profiteers who are more tied to quick returns than to the project’s long term health. How can this issue be addressed? Perhaps a simple tweak that can be made is to change the shape of the mining distribution curve.

This curve makes a simple tweak: the largest block rewards aren’t rewarded up front to early adopters. Rather, the block reward curve increases over time for a period of time. Perhaps this can happen over a period of 5 years. This increased time gives a chance for newcomers who weren’t insiders to learn about the project and on board. That way, the community is in a more mature state when the block rewards are in their maximally emitting stage. To prevent inflation from growing out of control, the block rewards will need to drop after the peak, but this process can be managed so that there’s impetus for new community members to join after the initial surge. In addition, the incentive is shifted so that early adopters no longer necessarily gain the largest rewards. Rather those who stick around for the long haul will gain the largest rewards. While this change won’t solve the problem of developer incentives, we can hope that long term thinkers will see the value of funding continued development rather than being short-term greedy.

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