There has been a great deal of hype surrounding potential ‘Ethereum killers‘ during the recent gas price hike, but many of them have been deemed ‘toothless’ due to token distributions heavily weighted in favor of insiders.
Ethereum has not been able to enjoy the recent market rally as much as Bitcoin and is still down 16% from its 2020 high. However, it’s still the foundation for all things DeFi despite the emergence of a number of ‘killers.’
Recent research into a number of these self-proclaimed Ethereum killers has revealed a token distribution model that is heavily weighted towards insiders. This leaves them open to centralization concerns which are detrimental to community development.
Crypto investor and Mythos Capital founder Ryan Sean Adams has delved into these all-telling charts from Messari asserting that these Ethereum killers are ‘toothless’ as ‘distribution is everything.’
See the blue part?
Those are the insider coins retail will never access until they're dumped on you. Might as well add the pink part too, since most treasuries are "on-chain governance" insider controlled anyway.
The Ethereum killers are toothless.
Distribution is everything. pic.twitter.com/HP1QkMj9U3
— Ryan Sean Adams – rsa.eth
(@RyanSAdams) October 27, 2020
Stacked Token Distribution
The report breaks down token distribution into four main categories which are public presale, community allocations, insiders, and foundations.
Adams pointed out that the insider category, which represents the largest slice for most of the projects listed, will never be exposed to retail traders until they’re dumped onto the market.
He added that the treasuries and on-chain governance are controlled by those ‘insiders’ and whales anyway so that may as well be included. Evidence of this was clear during the recent Uniswap governance vote which was dominated by just three whales holding the majority of the tokens.
The much-hyped Solana blockchain has almost half of the tokens slated for insiders whereas Flow has over 50%. This puts them in the same category as Ripple which tightly controls the supply of its native token XRP.
Ethereum Strikes a Better Balance
When asked about Ethereum, co-founder Vitalik Buterin was quick to respond with a similar pie chart indicating that the ETH distribution had greater balance. According to this data, just over half of ETH tokens went to the public sale, with a small slice for the Foundation, and the rest being minable.
— vitalik.eth (@VitalikButerin) October 28, 2020
The report attributed Ethereum’s success to its ICO and a large pool of early contributors;
“Ethereum found success because it made early investors wealthy. But it thrived because the pool of early contributors was considerably large.”