Through conversations with @themarkymark I have come to realize that offering a percentage of the initial supply of a token can be a very risky undertaking.
Building my own tribe has been quite expensive for me at this point in my life and though I think it will be worth it in the end, I have had to make some choices in the present that had to be very well thought through. This stuff is quite hard.
What Is The Deal?
So to start a tribe you need to have around 2100 BEE tokens plus some more in the months to follow to pay for maintenance fees. This comes out to a price of around let's say $750 USD depending on where the price of BEE is at (from what I've heard this is actually a highly discounted price compared to what the price was in the past).
In order to generate enough capital to pay for the BEE, I have considered the idea of offering an airdrop of a certain percentage of the initial supply and then repeating that in subsequent token distributions every year.
What Are the Risks?
As Marky described it, offering token supply to generate the capital needed is a "dual edged sword". In the short term you are able to actually create your platform as you can now afford it, but in the long term a few different risks jump out.
Risk #1 Price Difference
This is the least alarming risk and is actually one that I would embrace. If the project is wildly successful, than the initial investment of the person providing the capital could be worth a ton more than they originally paid for it. In other words, if the token is a smashing success, I may feel as if I have made a fool out of myself valuing it so low originally. At the end of the day though, it is about the community and if someone is able to make giant gains from the community... well credit to them for having a keen eye for investments!
Risk #2 Downward Selling Pressure
This is where things get a bit dicey. If there is not a strong belief in the product the person holding 6% has the agency to dump their entire supply. I am no mathematician, but seeing 6% of an entire ecosystems supply getting dumped has huge bearish connotations to it. There would be a giant red candle as people begin to panic sell seeing a tangible lack of belief in the project.
There are a few solutions to this in my eyes. The first solution is to simply not give the person that amount of the supply at one time. If they were given that supply over a long period of time, even if they were to immediately dump their holdings, it would not have catastrophic price effects. Additionally, you can ensure that the person has a vested interest in holding onto their portion of the supply by being sure that they actually care about the project they are investing and and want to be a pivotal part of it.
I think that a mix of the two strategies here is ideal because you want to lower your risk while fulfilling your promise and onboarding someone who will make the community better.
Risk #3 Supply Shock
If you were to give too high of a percentage to an individual or a few initial investors, there would obviously be fewer tokens in circulation and that could harm initial engagement/onboarding.
Once again in talking with Marky, I came to the realization that there are not a lot of best practices on this topic. It is such a new field that most are trying to figure out what works best. In creating a distribution schedule based on his work on Cinetv.io, I now have to think about what level of the initial supply will be liquid and available along with what the rewards pool and inflation will look like.
I believe that it is possible to find a balance between liquid and staked that will be healthy for the ecosystem but anyone attempting to secure a percentage of the initial supply must be aware of the risks before they buy in.
Risk #4 Inactive Tokens
If a certain percentage of the tokens are locked up in someone's account, it is drastically important for them to be an active member of the community. Say in an extreme example, someone is holding 10% of the supply and is inactive. If that is the case, our proof of brain model leads us to the conclusion that the productivity of the network is limited to 90% of the circulating supply. In that case, everyone on the network will be harmed.
My solution is to be sure that the person is either:
- Actively curating using their account.
- Delegating tokens to people who are active.
Having one person hold too much power on the network seems to be a dangerous and slippery slope. There are many risks to supplying anyone with too much power, and they must be well thought through before coming to any deals. I would not recommend doing this unless it is completely necessary for starting your tribe. Be sure to assess the risks and come up with a plan before everything happens so that you are protecting your future community members.
My goal is to be transparent in my tribe and create something that I really believe in. 90% of traditional startups fail, I can only imagine these numbers will be worse with cryptocurrency communities. However, I am a risk taker and am ready to put everything I have into my tribe... More information to come this weekend, it is still a secret LOL
Nothing regarding the funding of my tribe has been finalized and the numbers offered here were to illustrate the point and do not have anything to do with my tribe's numbers
If you have identified other risks for a situation like this please let me know, I am seeking feedback to achieve the most optimal outcome. I am a beginner and likely have not touched on everything needed
@mariosfame gif once again, I love it
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A few points,
You also have to factor in a large portion of your air drop will be dumped as well.
I got to disagree here, if someone holds 10% of the tokens and does not vote, that's a gift to the community. That user is not taking his fair share of the inflation and letting the community have it. I don't see any problem with this at all. My only concern is any one person having too much power to put the ecosystem at risk.
Point 1: yes you are right, however I would focus on this point greater in a different article as the topical focus I was going for was looking at one individual.
Point 2: that is actually a very interesting perspective as I had not considered the effect it would have on the inflation levels for the rest of the community. I was more focused on what you bring up in the second half of your point regarding the centralization of voting power. Great points and thank you for making some additions here to my article!
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Satoshi once said on the bitcointalk forum - every lost coin is the charity done to everyone on the network. I loosely quoted him.
Is this situation something similar? A person holding 10% of the supply is not using those coins at all. So it's like a donation to everyone else on the network.
Is this what happened with STEEM?
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Yes
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How are we ensuring that the same thing doesn't happen on Hive?
Are there any systems or checks in place? Or are we relying on the community members to be fair?
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There have been a few things that have been done to prevent it.
First there is no longer a entity with access to the Ninja Mine.
There is a 30 day delay on new Hive Power from voting so we have a warning if exchanges try to power up.
No one person even if exchanges colluded have enough stake to take over the chain
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It looks like your making progress. What about taking the Music for Life Communities way of airdropping tokens? Have people participate in the community and give out tokens for making quality posts.
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What was their method of distribution for the airdrop?
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At that point in time, it was creating decent quality posts to the community for points. Afterwards when the airdrop happened, they dropped it to the people who contributed to the community. I think it helped people from just dumping their token on the market.
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I learned like 'A LOT' after reading this post. Thank you for this Rob. I am no expert but just to add into the conversation -
I would suggest you to Airdrop tokens in such a way that the most active members of other communities will get the most supply. For example, Airdrop to LEO HODLers. :D
That way you can reduce a few risks, maybe I am wrong. One more thing you can do is to follow what PoB did. The owner did not inject too much liquidity and the best way you can acquire these tokens is by creating content & curation.
If someone is doing something to get your tokens, there is a good chance they won't dump them as soon as they get them.
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I'm not quite sure yet what the airdrop will look like. I'll continue to work on ideas over the next few weeks
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All the best Rob. Please keep all of us updated. And let us know if you face any issues. I know it's pretty tough to do all of this alone. But we got your back. 🤞✌️
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I am afraid I am new to blockchain social myself.
But if I had one piece of advice it would be to be patient and prepare a well though out plan of action.
Don't rush into anything because of the FOMO, your idea seems solid, but I would observe the qualities you like in other communities.
Use these as your guide along with any advice you may recieve from others that have been doing blickchain social from day one.
These are the people that have seen it all or at least most of it all and may understand what does and more importantly doesn't work.
I wish you all the best with this endevour and look forward to hearing more about it as you progress with your plans
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Well welcome to the blockchain! I like your advice about being patient and consulting the experts, that has been my plan thus far! I thank you for your well wishes and look forward to checking out your posts as well!
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And Thank you for the warm welcome
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