In a Twitter feud that started a whole week ago about the various issues with the Ethereum infrastructure, the debate quickly devolved to discussing poor wealth distribution within cryptocurrency communities and how ICO’s or Initial Coin Offerings contribute to that.
Whenever a cryptocurrency is introduced, it hosts an ICO for funding and development purposes where it sells tokens of its cryptocurrency to investors to get the currency up-and-running. The mechanism of this ICO may vary and many ICO’s have been subject to their fair share of controversy due to scams and securities law violations.
The debate which has emerged on Twitter is whether Ethereum’s ICO paved the way for the skewed and unequal distribution of ETH tokens among the community. Andrew, or @cyber_hokie, argued that when Ethereum was being launched, the 11 million Ethereum tokens were distributed with “transparency and understanding amongst founders and initial developers”, while 60 million of those tokens were purchased by presale participants using their fiat money, accruing risk but investing in a technology they believed in. This mechanism was pitted against traditional blockchain mining, such as seen in Bitcoin, where initial coins are mined “for a year with no competition [thus] accruing 5% of the total supply forever“.
Vitalik Buterin, the co-founder and Chief Scientist at Ethereum retweeted this argument, therefore showing that he, on some level, agreed with the argument that a publicised and open token sale is fairer than issuing mining rights.
On the other hand, popular Twitter user and cryptocurrency expert, Matt Odell, argued that 71 million of the total 107 million total ETH were premined and then sold to the public. The Bitcoin system, he argues, is a permissionless distribution system, where every Bitcoin holder has worked for their Bitcoin by mining or using their fiat money to hold Bitcoin. This is more fair, in Odell’s opinion, as it is a “voluntary and permissionless” system.
This can be argued the other way, arguing that in the Ethereum launch, people who purchased ETH tokens used their fiat money to buy Ether. These tokens were not “premined”, according to Buterin, who states:
The genesis block was literally generated by scanning the bitcoin blockchain for transactions that represented purchases of ETH. There was even a python and JS script to do it, and that was initially how people would get the genesis