Today EOS.io released a proposal explaining the initial plan for the EOS token distribution model. I wanted to take this moment to share the first thoughts that popped into my head. For those who don't know me, I'm a student of game theory and have a particular interest in auctions and incentives. This is right up my alley.
My thoughts
- It is deliciously ironic that they're proposing using Ethereum to launch the EOS token. If all goes according to the EOS plan, Ethereum, like the Titans of old, will give birth to the force which plots its own destruction.
- Practically, running the sale on Ethereum is a wildly smart move for publicity's sake.
- The model is clearly inspired by the AGS sale which was used to raise funds to develop Bitshares, DPOS, and ultimately Graphene.
- The sale will last a year, which means it will be difficult to evaluate intelligent bidding strategies early on.
- The fact that the optimal bidding strategy is not obvious means that whoever gets the game theory right is going to make a killing off this crowdsale. You should ask the team why they think a weird non-traditional auction is fair.
- There is no proposed cap on the amount of money to be raised - which will be deeply controversial and divisive.
- The first 5 days of the crowdsale will sell a block of 20% of the total EOS tokens, the remaining will be sold in equal blocks once per day for the remaining 360 days. Each block will be divided proportionally among those who contributed during its respective time period.
- Thus, the crowdsale is robust to changes in the ETH price, despite the fact that it's denominated in ETH. This is very clever.
- The first 5 days will set a baseline price for the token. Suppose $20MM is raised in the first 5 days; this equates to $0.10 per token. That means for each following day, on days for which less than $222,222 is raised, you'll be able to purchase EOS tokens for less than $0.10.
- The team will have to say something about whether the ETH contributed can be recycled back into the sale. In the AGS days, recycling was allowed - and this too was terribly controversial as it allowed committed team members to amass an enormous stake.
If this ends up being the final crowdsale plan, I'll keep posting my thoughts and analysis. Cheers!
Thanks for the thoughts. Could you briefly explain what you mean by 'whether the ETH contributed can be recycled back into the sale'? What exactly does that mean?
Recycling means that the dev team "contributes" ETH to the crowdsale that they've already earned in the crowdsale, buying themselves EOS for free in the process. It's actually not necessarily as sketchy as it sounds, but it should be audited.
It's not sketchy if this is how it works: suppose the dev team has employees and commits to paying them salaries. These salaries are paid out of the pool of ETH that's being contributed in the crowdsale. Once the salaries are paid, the employees are of course welcome to contribute their own funds to the crowdsale to obtain EOS for themselves. This is totally fine and ethical; it's equivalent to employees of a startup voluntarily forgoing their salaries and accepting a stake in the company instead.
I need to think about it further to think about possible sketchiness that could arise, though. This was one of the early scam accusations leveled against Dan and Stan in the early Bitshares days, because that's exactly how they ran the AGS crowdsale.
The level of sketchiness is determined by the percentage of crowdsale funds AND total EOS tokens that ultimately go to the developers. Timeframe is another issue. As developers it would be advantageous if there were no ability to short the tokens. They should be required to vest or lock the token to demonstrate long-term interest in the project. When the people involved in the project recycle ICO funds to then buy equity and then short it for gains in a native token on the competing platform, it doesn't demonstrate good project morale. Another thing to consider, is that as developers, are they already getting a percentage of total tokens, or not? If so, then that means they would be double dipping on every investment.
Actually, recycling was prohibited and the funds were left in public view right where they were donated - where they could be inspected by everyone.
But once people were paid for their services, they were free to spend their own money anyway they wanted.
Bottom line: funds were limited to covering expenses and paying developers and developers are people with rights to do what they want with the money they earn.
And despite that openness, AGS donations by team members were regarded with suspicion in the greater crypto community.
...and you use the term "greater" with all due respect.
:o)
Heh, "greater" here is only in the sense of "bigger." Not to be confused with "more open-minded" or "smarter" or anything like that. :)
But in my future discussions on this, rest assured that I won't paint AGS as a scam and I'll strive to distinguish between unethical recycling and ethical dev contributions.
Great response.
There is certainly opportunity for some sketch.
I took that to mean: 1) ETH goes to EOS team. 2) EOS team pays team members in ETH. 3) That same ETH is then used by those team members to purchase EOS tokens for themselves.
So much jargon. My head hurts
BAT ICO raised 35MM in seconds and was not hyped at all. Everyone is going crazy about EOS and you think that will only bring in 20MM in 5 days? Wishful thinking? Those tokens will potentially end up costing $1 a piece. And that does not sound so nice.
I made up the $20MM number off the top of my head, and yes, I've underpredicted raise amounts on crowdsales before. Don't be too quick to predict the results of this one based on the history from others, though. It's structured very differently than previous crowdsales.
But with similarities to the best structure i personally have ever seen ;)
But even AGS didn't have this initial special 5-day period.
but that's also why you'll have a year to buy them, and perhaps at some point, inevitably, a hiccup of one sort or another will give a better opportunity to pick some up than just the first day they're released
Possibly. But also, a project like this will hopefully be progressing, gaining steam and publicity as the year goes on. And then the exchange markets will potentially have it listed at the same time. I'm really not sure how that plays price wise. My guess would be after the initial burst, there could be some good buying time.
It's going to be very very interesting to watch how the crowdsale price interacts with the market price. They'll be the same, of course - but which will drive the other?
Would you potentially see most buying occurring at the end of each period? It would be riskier to buy early and then possibly have massive buy orders come in after you and dilute how many EOS you get for that round. Waiting to end and buying on "slower" days would seem like the more immediately obvious strategy. This would then favour those technically proficient enough to build sniper bots to execute buy orders right at the very last possible moment if the conditions are favourable and the crowdsale price is predicted to be lower than the current market price.
On average, after the initial 5-day period, the crowdsale price will be exactly equal to the market price. On average, for an appropriate definition of average.
You're thus pretty safe contributing at the beginning of the period. On average, you're perfectly safe. At then end of the period it's a little asymmetric - you'll either know for sure that it's a bad price or you'll be uncertain whether it's a good price or not. Thus, you have more information at the end than at the beginning and this should mean you're better off waiting till the end.
I saw that happening during the MUSE/PEERTRACKS sale!
Snipers at the end of a period
Okay What do millimeters have to do with crowd sales? MM
Multi Million
$20MM means "20 Million Dollars"
I also think this is going to be hugely successful. Is the 20% first sale to prevent the network overload that BAT coin saw?
Really Clever.
Soak up Billions of dollars in a single smart contract and create a massive liability for the ETH network/market/price.
I don't think so. I think the ETH will not be locked in a contract.
I believe it is liquid after the sale. So basically every day.
I hope you'll continue to update us on your thoughts regarding game theory and the EOS ICO.
How about a few plausible scenarios?
Stay tuned.
AGS days proceeds were not recycled, people were paid market wages for work performed. That was personal money, not recycling.
Please hold off judgment on this issue until we release final terms and conditions. All we have released so far is technical structure.
I understood the public rationale for what I called AGS recycling, and it was nonetheless controversial. No judgement from me yet.
Great analysis. One year is an eternity in crypto and patience is a rare virtue.
Was thinking the same thing — "a year?! good grief."
Why complicate, just take our money. :)
I can't really coprehend this ICO at all. Why they use ETH. Will EOS tokens be locked during the time of distribution, which means they will be released next summer? Then if we buy it at 0.10$ price, according to this it will be better for us to wait for the next year to invest than now. Can someone explain, please?
@dantheman confirms they will not be locked during sale period. So that significantly simplifies the bidding after the first 5 days: if the day's price is lower than the market price, contribute.
Yep so basically arbitrage city.
I'm going to be really, really choked if Dan snubs STEEM and BTS and makes us all buy ETH to participate in the ICO. Really??? I'm going to have to sell STEEM/BTS/BTC and buy ETH to get EOS? Why in the hell would Dan want to boost the liquidity and market cap of ETH? Imagine the huge liquidity that would flow into and through BTS if the EOS ICO was through BTS. It would be a massive boon for BTS. What am I missing? Why the ETH love???
It's actually a good move to bring ETH down. Imagine ETH people knowing about an ICO that could replace ETH, there'll be a huge influx of money from ETH to EOS. Moreover, BTS and STEEM don't have smart contracts that allow this type of a much fairer token distribution.
Steem and Bitshares are not smartcontract platforms capable of setting up an ICO system.
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This is a fantastic post. A type of logical criticism that is wildly needed here on steem.
This is one of the prime aspects to fuel my post today EOS the "Ethereum Killer" with an ERC-20 debut: what is up with this strange ICO?.
I have worries that this structure coupled with ill-informed investors will lead to cycles of FOMO that drive the token price into the stratosphere. I wonder what comments you would have on my concerns - I don't have the formal game theory background you do so I would love your comments.
https://steemit.com/ethereum/@kyle.anderson/eos-the-ethereum-killer-with-an-erc-20-debut-what-is-up-with-this-strange-ico
I'll take a look and let you know what I think.
They will raise billions of dollars that they don't need, we will soon see Dan on his yacht and in a new Penthouse in Caymans Islands where he registered EOS company to avoid taxes. I'm out of this ICO as it feels like a scam more than anything else at this point. The tech is good and I will make an APP but I will not send any money to EOS, uncapped ICO that repeat itself everyday for 1 year, insane.
Block.one has 100 shareholders from across the industry.
b..b..but scammy ponzi! :)
I can foresee this becoming a sprawling venture. Tip of the hat, @dantheman
The ICO money is not for the shareholders, it's for the development. Shareholders can sell their tokens on the market like everybody else.
where does it say an ICO has to be for development? yeah, sure I want to know where the coins go but that doesn't mean anything in this context.
If its not for development then why do they need to raise any money at all ? ICOs its the same as IPOs, there is a reason behind an IPO, to raise money to develop the company. The reason is never to dump shares and buy yachts.
I'm sorry but I don't have the answer to your question and can only speculate but I'd imagine the company is going public to give the average joe a chance to own a piece. yeah, sure they could have been open about the investors from the start but anyone who knows anything about development knows development costs time/money. Plus, people make mistakes and a good person corrects their mistakes once brought to light and all we can do is wait and see what the eos team says about everything before we draw conclusions.
nice summary, boy you got that together fast. but to make it just a bit clearer, I'd include their example:
For example, if 20 EOS are available during the window:
I don't have an opinion yet on this but I am interested. where would I go to read more or buy some? thanks for putting this information out here. you earned a follower.
In case you have seen it here is a great video explaining some of the the tech behind EOS
You can subscribe to the mailing list at eos.io. That is your best bet for getting up-to-date information about the token sale.
ok thanks
This type of maximising the funding through cleaver organised crowd sales I find too much like using the hype to get money from those pockets that do not really know what they are doing. regardless if it is EOS and Dan behind it, it smells like Wall Street type of emptying the pockets of people that do not know what they are doing.
Really great analysis, thank you. And great job getting it out so quickly! :)
There's more where this came from. I want to think hard about this issue of EOS.io employees recycling their salaries back into the crowdsale, do some analysis of fairness, etc.
I don't think the recycling of salaries is an issue, so long as the salaries are at fair market values. The fact that employees of EOS are using their salary to buy shares is no different from Joe Blow using his salary from his job at the pizza shop to buy shares, in my opinion.
Where issues of ethics and fairness arise would be if employees are in possession of privileged confidential market sensitive information (for example, development progress) that is not open to the market and are buying shares. Publicly traded companies generally have strict rules on employee trading to avoid running foul of insider trading rules (generally limited trading windows a certain time after price sensitive announcements have been made).
How could the problem of insider trading be solved with decentralised organisations?
Yes i recommend people be careful putting all their eggs in one basket and instead buy a little at a time.
Since I don't have much eth, but mine it I could wait till I reach a certain amount and then roll the dice?
Correct assesment?
I'm surprised to say the least that this crowdsale did not have the purpose of locking up as many bitshare/steem as possible.
Good writeup. I really like EOS. I don't think this sale structure is scammy or shady or anything like that. However, it is going to take some time to fully grasp the best approach. Part of me would just prefer a straightforward ICO sale with some protections, but this does appear to allow wider distribution. So I see that as a positive here.
Thanks for your thoughts!
Ethereum is a good choice for the cooperation EOS. For Dan as a person I dislike it very much.
The distribution model will create just sheeps and loosers. My prediction is, the best move is not to move into the ICO and buy it cheeper on the exchanges.
Why controversial and divisive?
Good question. I say this because of what I've seen in other token sales; I think limiting the take is seen as sort of "good sport" on the part of the dev team.
The recent incident with BAT (Basic Attention Token) suggests the opposite might be true. I guess a lot of people were deeply disappointed.
Disappointed they couldn't get in on it? Makes sense.
Yep, the felt cheated as only rich (and smart) folks could afford paying huge transaction fees to jump the queue.
In this respect EOS distribution seems to be the opposite: everybody has a chance to take part in the process of discovering a fair price.
Confused on pricing...
Will all tokens over the course of the year be sold at the same price - or how will it work, if tokens can also be sold on the exchanges while the initial billion are being distributed through the contract?
Yes, tokens will be tradable while being distributed.
Interesting.
The interactions between the crowdsale price and market price will be interesting. Obviously they'll be nearly the same, but which will drive which?
That can be regarded as a bidding competition between present investors and the company.
So complicated ... :(
Anyway, for those who have no additional money, hold on to your Steem or BTS, they will enjoy the benefits brought by EOS!! Make sense?!
not really
Thanks for sharing your thoughts
Thanks for sharing your thoughts, I'm new to the crypto world.
Think EOS is a good thing.
Honestly, I think EOS could be a great thing. I'm also new to cryptocurrency, and personally I've never even heard of Ethereum - but your post offers some insight into this new proposal.
Thank you @biophil. You have a new follower =)
The Armageddon Broadcast Network
Oh my... Ethereum is a big thing
Excellent run down. Resteemed. Here is my thoughts on how to play the EOS ICO https://steemit.com/eos/@wolfofcrypto/eos-initial-thoughts-on-how-to-play-the-eos-ico
Never put all your eggs in the same Basket. that will save you alot of trouble.
Can we also say that if on the (n+5)th day the money raised is greater than 222,222 dollars, the price per token will be higher than 10 cents?
n = days after the first tier of ICO
Yes, exactly.
Brilliant. I think that uncertainty is a good equalizer and promotes the forming of strategies and teamwork, and dan is using it to make a fairer field for everyone. He's a good man.
Wow, I never expected to read posts against buying... They are very convincing I may say...
The auction model is interesting but I cant derive to a justified reason for an uncapped raising, do you have any thoughts on why this was proposed ?
well done, that was clearly my thought too::::
[If all goes according to the EOS plan, Ethereum, like the Titans of old, will give birth to the force which plots its own destruction.]
I instantly thought if EOS goes fullon Ethereum will be "the sidechain" just matter of time. great article! and great strategic move from @dantheman
EOS token sale analysis
https://steemit.com/eos/@steemitanalysis/eos-token-sale-analysis