There is a lot of focus upon token distribution. This is something that is heavily discussed because, in an industry that touts decentralization, token distribution is probably one of the biggest scorecards of how things stands.
Unfortunately, from a direct point of view, this seems to be an area that is lagging. Or is it?
We all know the assertions against the major cryptocurrencies and how so few wallets control most of the tokens. This is true for Bitcoin, Litecoin, Ethereum, and EOS. We then get to a situation such as Tron where one entity controls the majority of the tokens.
Pre-fork, one of the biggest complaints about Steem was how the Whales dominated to entire platform. This is something that carried over to Hive since the token distribution was mostly copied.
Even today, we see an article that discusses DeFi and how, while getting more popular, is only getting more centralized. It appears that the shift is towards fewer wallets holding the largest percentage of the share.
Here is a look at Chainlink and Kyber Networks.
Obviously, this is not very encouraging. What is most concerning here is the trend.
It is important to note that the focus needs to be upon direction. Is a project moving to a more centralized distribution or further away? The world of DeFI, at least with the major players, is going towards centralization.
This really should not be a great surprise. Anytime we see a financial instrument where the entry is based upon money, it only stands to reason that those with it will be able to acquire more. This is true whether we are discussing cryptocurrency or fiat. Those with the currency will be able to acquire more of it.
Here is where the mechanism for distribution is vital. Most of the cryptocurrency industry is a buy in model. The big tokens mentioned earlier, for the most part, require entry via purchase. One goes to an exchange, brings some fiat or crypto, and swaps it for BTC, LTC, or EOS. Of course, with the PoW chains, one could invest heavily in mining equipment to acquire the tokens. In the end, the result is the same.
I long maintained that one of the advantages to the Proof-of-Brain model is that it greatly enhanced token distribution. Over time, the tokens get spread out among more accounts. Unlike the DeFi projects mentioned, the trend with Hive is in the opposite direction. It is moving away from a centralized token distribution to one that is more decentralized.
Over the past few years see the results. While it is not noticeable on a short-term basis, we can see a drastic difference when we compare it to the long-term.
Here are charts of the token breakdown in August of 2017 and one as of two days ago.
This shows how 42 accounts held more than 75% of the tokens while 268 controlled more than 90% of the stake.
We see the improvement with 33 accounts now holding 36% of the stake and 344 having around 65%. The move was slow yet consistent over the last few years.
All that aside, even with centralized projects, are we not moving in the direction of decentralization?
The challenge with the existing system is the same players tend to control everything. If we look at the institutional holders of the major stocks, we see the same names coming up. They own a piece of most of the major companies. This give them incredible power.
Cryptocurrency is taking on a bit of a different tilt. When we are talking about Whales, we have to be specific about a certain project. It seems like that, while the distribution of any one token is in a few hands, collectively, it is in many.
For example, the top Bitcoin holders differ from those on Ethereum. We know that the top accounts now on Steem are much different than those on Hive. Cardano Whales are very different from those on EOS.
This gets even more diverse when we consider the projects that are tied to the different chains. For example, how many of the Whales are the same in AGI and Minds? It is likely there is not a single crossover. Even with the Hive-Engine tokens, we see great difference. The LEO Whales are different from those holding PAL.
Of course, this all takes on another twist when we consider the wealth in digital assets. Who are the biggest card holders on Splinterlands and compare that to the SPORTS Whales?
It is obviously something that is playing out across the entire crypto space. Both Ethereum and EOS have many projects where tokens are created. Each is catering to a different audience, providing some value to those people.
Therefore, while individual project certainly have the element of centralization at this point, the collective sees token distribution that is wide and varied.
And this is something we do not see in the fiat world
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Token dominance is the one that might drive the market one way or the other. Mode diversite and a more plain distribution probably would be healthier for the ecosystem.
Without a doubt.
Centralization creates an economy that is too brittle. For one to be resilient, more decentralization is needed. Thus, the more tokens, of all kinds, are spread out, the healthier the economy.
This is what is needed at every layer of the Hive economy.
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It is important that this distribution of token, which reduces the voting power of the whales, helps boost new users with excellent content.
This is one of the coolest thing about HIVE and we can create more middle class HIVE Citizens and have less inequality and healthy ecosystem in the long term
It is slow but it has the potential. We will see, over time, if it pans out. Hive is far from perfect so there can be ways to enhance this.
Personally, I think the focus upon the different applications is what will create a middle class. While the HIVE holdings might remained skewed, when you look at people's holdings, priced in HIVE (as the pair token), you could see a strong middle class.
Suddenly someone with a couple thousands HIVE has 40K or 50K when you add in all their holdings from Splinterlands, tribes, or other games.
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Cheers for the interesting post! It's certainly important to focus on the distribution of tokens as well, as you've said, since the most of us are continually looking towards the price all of the time. This is especially true with DeFi becoming an ever growing ecosystem, and with platforms that run on a Proof-of-Stake model.
There's a lot of potential in the future, and you're right in that there's more variety and widened distribution of wealth across DeFi, compared to the traditional order of finance. What we need to see now is increasing diversity in how tokens are held, between the whales and the minnows swimming along. If it keeps going the other way, then DeFi will be no different than having to face the inequalities of wealth that we see often today.
Thanks, and have a nice day :-)
Certainly, the DeFi world, as it is termed today, is moving more towards centralization. Of course, if we look beyond the "traditional" DeFi such as those on Ethereum and focus upon all the financial aspects of crypto, then we do see a move the other way.
On Hive, while not a lot of true DeFi, we can see a lot of wealth being generated outside the main Hive node. Obviously, most is not worth a lot in fiat terms at the moment but that could change in the future. It also could result in a lot of wealth when priced in HIVE.
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Ah, interesting. The Ethereum chain is indeed growing ever larger and more diverse, and it'll be intriguing to see what happens when ETH 2.0 rolls along later. For now, HIVE isn't worth much on its own, but with good growth and further adoption coming soon, we might be nearing an end to seeing $HIVE being priced in the cents. That's the hope, and my goal anyways :-)
Cheers!
Some of the tokens on Hive-Engine are starting to move as they find more adoption.
There is a lot taking place outside the main space.
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Oh, I'm just learning about this now, though I haven't checked it out since I pretty much left Steem-Engine on its own. Cheers!
For me, only fewer users owning large amount of tokens won't help a token to grow. But a large number of persons holding the coins would foster growth
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A better and fairer distribution of the tokens would be essential (for many reasons), but it is a pity to see that this does not happen on the part of many users.