A Couple of Words on the Fair Sale of EOS
Yesterday I had a chat with @dan on EOS's Telegram Chat, discussing what "fair" means, as far as the distribution of the EOS tokens. Some of you may be surprised by the different interpretations of a single word, so I will try to summarize our discussion. This is a clarification article and I will neither throw brown handfuls at Dan, neither try to defend my or his understanding of the term "fair", as far as EOS's initial distribution is concerned.
After looking at EOS's Draft Contract on GitHub, I was a bit perplexed by the following distribution example:
20 EOS are available during the window
Bob contributes 4 ETH
Alice contributes 1 ETH
Bob contributed 80% of the total contributions and gets 16 EOS
Alice contributed 20% of the total contributions and gets 4 EOS
By "window", you should understand one day, during the 341 day long distribution period.
Following this example, it is clear that "fair" distribution means that the more a person invests during the window, the more EOS he will be able to obtain. On certain days, there will be well funded investors, optimistic about the future of EOS, who will be willing to invest (let's use the appropriate word here - "bid") a large amount of money, effectively raising the price for everyone, who placed their bids during this window.
So, on some days, you will get EOS at a higher price, on other days you will get it at a lower price, but eventually, if you bid every day, for 341 days, you will get a somewhat average price, which should be true for everyone participating (which questions the necessity for such a long distribution period).
So, in this sense, "fair" means mathematically "fair" - if you invest a lot of money, you will get more EOS.
Now let's take the above example and change it a bit:
20 EOS are available during the window
Bob contributes 400 ETH (because he is a millionaire, 120,000 USD are fine)
Alice contributes 10 ETH (because she can't afford to invest more than 3000 USD)
Bob contributed 97.56% of the total contributions and gets 19.512 EOS
Alice contributed 2.44% of the total contributions and gets 0.488 EOS
This is still mathematically sound.
But doesn't allow Alice the same opportunity to invest in a new currency, as Bob has. So in no way can we talk about socially "fair".
To elaborate on the above statement - if you are rich, you will have the opportunity to be richer; if you are not, EOS will not give you the opportunity to repeat Bitcoin's success. There's no social innovation to this project, no "Power to the people", "Cyber Robin Hood", "Hackers" (the movie), "Take Down the Man" and "Banks need to be destroyed by decentralization" feeling or opportunity. It is just a business project.
Certainly this whole EOS hype will bring a lot of money to Dan and the investors backing the project - after all, they've designed the distribution in such a way, as to have people fighting (bidding) over EOS's (unknown and speculative) value. And I understand that - it was his work and the investors' money, and they would like to sell their new product for as high a price as possible.
Which brings me to another point. Bitshares was created in 2013, in 2016 we saw Steem (and Steemit) and in 2017 we will have EOS. I truly hope Dan has the time to take care of his projects and not abandon them, but if one thing is clear, following Bitcoin's success story, it is that developers are creating one cryptocurrency after the other, making huge money from people's dreams.
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You left off some definitions of fair: Nobody should get something for nothing
Both Rich and Poor get the same price and are offered the same RATE OF RETURN. So it does give the poor man an opportunity to repeat Bitcoin.
I do not want to create or endorse a world where "being rich" is considered "unfair". It is not whether someone is rich or not, it is how they came to be rich that matters. If someone comes to be rich by virtue of getting something for nothing (stealing other people's money) then that isn't fair.
In this case your definition of social fairness is that some people are entitled to getting something for nothing by virtue of being poor or being human.
Social fairness is equal pay for equal work. Money is proof-of-past work unless it is acquired by fraud or theft.
Dan, you're not talking to a communist. I understand this is a foremost business project.
The average Joe will find it hard to get a hold of enough EOS to become rich in the long turn, with the big guys raising the price, so my question is what is the social side of introducing yet another digital currency - what are the benefits to the crypto community?
From what I understand EOS is not just another digital currency. It is platform that will enable it's users to create apps with industrial grade speed and scalability with zero transaction fees. Not everyone has the know-how or the resources to carry such endevours but that is just the result of social division of labor.
Average Joes such as myself do not get rich by holding any form of digital currency unless if you are lucky to get in at the right time.
The blockchain is just a notary service, proving that something happened. If transaction speed was needed, LiteCoin is already available, and so is Steem. There was no need for a new currency - if EOS solves some problem, which other cryptos can not, then I'd like to read about it. What are the practical benefits of EOS, which other cryptocurrencies do not have?
From my point of view, this is just a marketing trick, which so many developers have entered into, to make a quick buck from the hype surrounding a new currency distribution, without actually bringing any benefit to the digital world.
Thanks for commenting!
Speed and on-chain scalability are important for mass adoption. If the following statement from the whitepaper can be acomplished then any application can be built on the EOS blockchain. You could potentialy build 100 Steem like networks on top of EOS.
LTC, BTC and ETH or any other POW blockchain is incapable of achieving this on-chain.
Here is the link to the post about the EOS whitepaper
As I mentioned before EOS is not just another coin it's a lot more then that (provided that the product can be delivered...which I personally think that it can be done).
Oh, I've skimmed through the White Paper last week and all I see is marketing and promises of great things. What I did not see is a working application, which would produce a product or a service to the community.
As I just replied to another user, people are currently investing time (and soon - money) in their dreams, not in something with proven value.
Let's get a bit technical - answer these questions before investing in EOS:
What is the difference between a typical blockchain and EOS, which claims to be a blockchain operating system?
Why would Steem be fast enough for Steemit ("Steem can handle a larger userbase than Reddit"), but not fast enough for its future clones?
Which brings us to the logical question - What is the practical value of starting 100s of Steemit clones - is Steemit so popular that it outperforms Reddit and Facebook, that we need a second one, let alone a hundred clones of it?
Where is the proof of concept - a variety of applications, serving the needs of different businesses, who use the EOS platform? Are there even examples of what EOS can be used for?
If you didn't answer any of the above questions, consider this - would you buy the promise of a great product (ala Kickstarter, where most projects fail, while being horrendously overinvested in - remember the 300 thousand dollar self filling bottle?) or would you buy (invest in) the completed and working product, which will be useful to you?
No, right? Because if you get in early, you will become a millionaire, right?
Hence my point, that unless you have thousands to invest in EOS and grab a bigger portion, you will not profit much - that is, if this project turns out to be successful and not yet another new cryptocurrency, created with the sole purpose of cashing in on the hype of wanna-be-millionaires.
There's something else to consider - I may be saying that there will be big investors buying EOS, but the truth is, that thousands of people with $10k in their pocket are much more powerful than a couple of rich guys. And rich guys usually don't invest in marketing talk - they want to see working examples of what is promised.
So unless you can see the amount of money being invested by single individuals, during the bid process, I would still consider this a bad investment. Hah, it just occured to me - even if you could see the amount invested, it will be spread out over 341 days - you wouldn't know if a rich person is investing 1/341 of his capital or a poor guy throwing 100% of his cash for some EOS.
Mainly Parallel Performance & Partial Evaluation of Blockchain State
This is just an example ...nothing more.
You are getting ahead of yourself here. Those apps are 1-2 years down the road after the lunch of the blockchain
Any web based service or application currently being run on a centralized server.
Regarding WHEN and IF it's worth to invest on this project. Well that's up to each individual's decision
So this is not an operating system, but a parallelized (multi-threaded) blockchain. A marketing trick for non-techies.
Also, from what I've read in the white paper, this is only implemented on certain levels, where the software logic allows that. So we have a faster blockchain, despite Steem already being fast enough to support a network bigger than Reddit (according to its own developers).
Where it falls short is lack of examples for its use, i.e. it has no purpose, but it was built. Someone mentioned an eBay site, powered by EOS, because there wouldn't be transaction costs. But there will be transaction costs at the exchange, converting fiat or other cryptos to EOS. That is, if you can even convince 99% of ebay's users that this is better than ebay (and there's no reason why it will be, as EOS doesn't create any advantage).
Everyone is investing in the hype, kickstarter style. The winner is EOS's marketing department and the investors.
As I mentioned in another post, I would invest in EOS once I see unique software running on it. Then any EOS I have will slowly increase in value. Until that moment, it's just speculative bidding, favoring only the developers and their initial investors.
Also, as a side note, I have to disagree with your comment, that my "... definition of social fairness is that some people are entitled to getting something for nothing by virtue of being poor or being human."
This is not just my opinion - it is the opinion of many prominent figures around the world, which has made its way into human rights documents, constitutions and, I'm sure you're very much aware of this document, the American Declaration of Independence, containing Thomas Jefferson's popular statement that "All men are created equal".
Thanks to the efforts of such people, today men gain some rights from the very fact they are born human, such as their freedom and also receive the support of the state, should they need it - police protection, medical services, fire services, education and even social wellfare for the poor.
Therefore, if we are creating a decentralized world with no central authority, this should certainly not be a world without fair and equal rights for all (digital) participants.
This is why I ask - what are the long term social benefits of EOS, if the distribution of EOS contains none?
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However, if every big investor does that, token price will be too high. Since it will be in an exchange after the first 5 days of ICO and further daily ICOs will be held, that too high of a price will naturally lower. Big investors wouldn't want that so they would have to put lower investments giving enough opportunity for the small investors to buy at a higher percentage than how ICOs did recently. In other ICOs small investors wouldn't even be able to get a single token because big investors pay to be the first.
Well, that depends. If a big investor has $100,000 and a small investor has $10,000, and they both equally spread out their investment among the 341 days (long distribution) or among 3 days (short distribution), then in either case they will both get the same percentage of the available EOS.
It is true that in a shorter window, the money invested per day will be higher, but the number of distributed tokens will be proportionally higher as well, making the average price in both cases (long and short distribution periods) the same.
Of course, EOS developers and investors want people to speculate as much as possible with the price of their product, hence the longer distribution period. This will, however, have a negative impact on the price of EOS. The hype will be over way before the 341 day period, for two reasons - first, because no one was able to explain what is the difference between a blockchain and a blockchain operating system (people just repeat mindless marketing banther, which they don't understand themselves, and EOS doesn't have a single completed operational application, showing its usefulness to the communiuty as of yet), which brings us to reason two - the secondary market would decrease the price with time, beause of reason one, effectively dissuading any investors to continue bidding for EOS tokens.
Remember, at this point in time, the EOS price is driven by sheer hype and speculation and not a single practical example of its use. People are investing in their dreams, not in something they've actually seen produce a product or a service.
I'm guessing this is kind of personal. It's not the big investors' fault why small investors have only so much to invest that they deserve to be compromised so hard. This token distribution is not a way to make small investors relatively grow more money than big ones. If they do that, then what will drive big investors through time?
Thing is that the bigger investments you put, the higher is the risk so you might want to thank that you're still not yet a big investor if you aren't.
The purpose of this is to lessen the dominance of big investors not to specifically make smaller investors grow more money. EOS has learned from past ICOs wherein the big investors dominated because they put so much money to be first in the line of putting money. Let's try to use what we learned from the past instead of making what small investors have in mind.
You're already using one practical example of another technology behind EOS and that's Steemit. That technology is called Graphene and it was also made by the same man.
There's nothing personal - I'm just annoyed that I see one crypto created after the other, with the sheer purpose of cashing in on hype, without actually adding any value to the crypto world (there's no social aspect - we don't gain any new useful technology to decentralize the world, it's just another business project).
If you claim that Steemit is "another technology behind EOS", than this begs the question - why create EOS, if we have Steem? You can read more about it in the reply I just posted above (or click here).
Maybe the investors of those cryptos you were referring are very positive about the future of that platform. Some take the opportunity to make more money through its pump and dump. Crazy, right? Then that's a confirmation that you're in crypto world. They also feel that whoever does crazy things right now and take big risks may be among the richer to richest 'cos they speculate that traditional currencies, which are fraudulent, will crash.
Every penny or dolllar paper that we give and take are really just made up, and big banks take profit from it as a business model. 'Cos it's a business. Their service is a business. Their money creation is a business. With the big demand for a representation of value, there's no doubt taht owners of these big banks are among the richest.
EOS is for general cases. Steem's focus is for social media and it came first. Steem can be assembled to EOS as well as every other services/platforms on the internet right now. So it's something big.
Fiat money are just as "made up", as crypto currencies. There's no benefit of one over the other. Indeed, banks take profits, but they provide a very important role - the interest rates influence the value of the currency and hence increase or decrease the speed of the economy, keeping a reasonably low inflation.
Cryptocurrencies, on the other hand, have no central authority. That's why no one is stopping Poloniex from charging whatever commission they want, making it harder for users to operate with their funds at times when they are losing (as was recently the case with Bittrex, if I remember correctly), or even appropriating people's money for themselves - you can't really complain to anyone about that.
Hence my question - what are the social benefits of EOS? So far I only see - using your terminology - a "pump and dump".
It is true that EOS can be used to create another Steemit - but did you read my comment, asking why would we need another one?
Think of ebay utilizing EOS resources because of its scalability, the ledger, and that it requires no transaction costs.
EOS is more on the business side. You should watch the presentation at Consensus 20017.
We need EOS because it could solve the problem as to why large scale businesses cannot use Bitcoin or eth because of their transaction costs and that they are not relatively scalable.
The question is why would we need to to build another Steemit when Steemit is already big and has acquired big developments since.
It is impossible to remove transaction costs - even if the technology charges nothing for transferring EOS from one user to another, there's always the cost of transferring EOS to a fiat currency and vice-versa.
Imagine having to buy something from EOSBay (I should copyright that :) ) - you would either have to buy EOS with dollars or exchange another cryptocurrency for EOS. In either case, you will pay some cash to the exchange you are using and to the miners of the other cryptocurrency.
Also, if there are no transaction costs, the developers and sysadmins behind EOS will demand payment for their work and hosting services, which will have to come from somewhere.
Additionally, most people have no idea what Bitcoin is, let alone exchange their money for it, or even manage converting it to EOS, to buy something from EOSBay, when the normal eBay is still fully operational and sufficient.
This is why I highly question the feasibility of this project - even if it is technically sound, to begin with, and not another "pump and dump".
And I agree with you about Steemit - that was my point, we don't need another one.
EOS token sale analysis
https://steemit.com/eos/@steemitanalysis/eos-token-sale-analysis
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