One of the most hot button topics in cryptocurrencies, especially with the SMT (Smart Media Token) coming soon, is token distribution. How can we help people find out about a particular token? How does one distribute tokens in an equitable manner? In face, how do we determine what "equitable" even means?

Having been in the cryptocurrency space for over three years, and participating in a number of ICOs and airdrops over that period, I'd like to talk about token distribution: how to do it right, and how to do it wrong.

This will be particularly helpful for those considering launching an SMT.

The Wrong Way to do an SMT Distribution

I'm going to make one assumption right off the bat: the reader is an honest developer who is creating a token that is more than a simple money grab. This is not a Bitcoin clone with a huge premine designed to make the developer rich selling to fools with no real long term plan.

When I talk about the "wrong" way, I'm looking at all the ways to sabotage a token from being successful. We'll list a few:

• No vesting term for founders

• All at once delivery of tokens

• Delivery/liquidity of tokens before utility

• Use of gimmicks to find speculators

• 1:1 Airdrops

No Vesting for Founders

Creators of a token should be paid a significant portion of tokens for their effort and risk-if the token succeeds, founders should be the first to reap the benefits. They should also fail along with everyone if the token fails.

However, they shouldn't be the first to go liquid and sell. In the unregulated markets of cryptocurrency, it is too easy to let founders give themselves tokens first and be the first to sell them on an exchange. Building trust with investors requires transparent vesting timelines that prevent founders from cashing out with inside information.

SMT Easy Fix

One easy way for SMT creators to fix this is to deliver SMTs as "Powered Up" to team members while delivering more liquid (with the opportunity to power up) tokens for investors. They could also code their SMT in such a way that powering down is impossible for the team members the first year.

For example, an SMT power down might take 13 weeks, just like Steem Power. But if SMTs can be tweaked, (and I'm not sure if that will be the case) certain accounts could require a much longer power down period until a certain date, after which they'd revert to a standard 13 week power down.

All at Once Delivery of Tokens

Airdropping a large percentage of tokens onto speculators greatly increases supply. Without an equal increase in demand, this will lead to a glut of tokens being sold as quickly as possible.

This is why I don't recommend airdropping tokens. Of course, I enjoy receiving airdropped tokens, but I expect them to drop in price quickly once they are liquid. Unfortunately, most tokens **plan to have a use, **but don't **yet **have a use. If the only thing I can do with an airdropped token is sell it and grow my stack, I have to assume a lot of other investors are thinking the same thing.

SMT Easy Fix

Distribute tokens to investors and speculators over a longer time period, such as once a quarter. Put this in your white paper!

Tokens without Utility

I love my Steem tokens-they have a use! I can power them up and my upvotes are more powerful, giving me more influence on Steem. Most tokens are still under development, and their only use is for speculation. A large quantity of liquid, useless tokens does not support a rising price.

I also love Ethereum, which allows me to interact with the Ethereum blockchain (fees are paid with a very, very small fraction of ETH). A growing number of tokens on ETH are usable, too.

On the other hand...

I dislike Litecoin, which allows me to do...uh...pretty much nothing that most other blockchains aren't already doing, except many are doing it faster and anonymously. Sorry LTCers, this is a dead coin walking in 2018.

SMT Easy Fix

This will be pretty easy for SMTs, which should allow for instant powering up and earning SMT inflation, while gaining the power to influence within the SMT dApp by having greater power over the SMT rewards pool. There is no reason an SMT shouldn't have immediate utility.

Use of Gimmicks to Find Speculators

It's really easy to buy a few thousand Twitter followers (well, it used to be, maybe that's changed since bots got political) or Facebook followers. It's also fairly easy to stuff a Telegram channel with a high number of people from an Earn.com promotion.

"Join our Telegram channel!" -things you won't hear me say.

But it's a really bad way to get people to follow your project. You'll get a lot of people who are drop and dumpers, eager to sell the airdrop immediately while moving on to the next token. It's unlikely you'll form much of a community this way.

SMT Easy Fix

Again, this is easy for SMTs, as the Steem is a bunch of communities. I've seen a lot of community development already, as pre-SMT projects like @steemhunt are already live with a product. In fact, projects as advanced as Steemhunt will be really interesting to watch, as they were designed as dApps from the very beginning, and have already been successful using Steem as a general purpose token.

1:1 Airdrops

1:1 airdrops can be problematic. This should be obvious to anyone who is frustrated about the Gini coefficient and whales in general.

With 1:1 airdrops, a new chain is started with the same exact distribution as another chain. This means that those with a huge token count receive a huge distribution of new tokens on a chain they likely don't care about. Again, this creates a large supply without matching demand.

I'm not a class warrior here on Steem, and I don't spend much time worked up about the whales who got in early and hold a ton of Steem. At the same time, I'd like to see new whales being made by people who invest their own money or time heavily into a new project. It's good to see new opportunities for new people.

SMT Easy Fix

Having a low level 1:1 airdrop **can **work, if a ceiling is imposed. For instance, Telos is an EOS fork that has limited genesis accounts to 40k EOS. That's brilliant, as it provides a ceiling and equalizes the playing field by quite a bit. SMTs could mimic this and do 1:1 airdrops with a ceiling of 10-20k Steem Power for their distribution.

(Unfortunately, Telos is also granting itself 6 million tokens on its blockchain...so...I don't recommend it)

The Steem blockchain's multiple measurements: reputation, Steem Power, SBDs, are really good one for airdrops if done properly.

Conclusion

There are a number of ways to launch a new token, and SMT developers should pay attention to these worst practices. I hope to look at best practices later this week.

What are the worst token distribution practices you've seen?

-Jeff

PS: Learn more about how to grow your Steem by reading my 5 Proven Steem Hacks...click the yellow banner below!

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**Posted from my blog with SteemPress : https://steemmaker.com/smt-token-distribution/ **