First thoughts about the proposed EOS token sale
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.
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.