Remarks on Skycoin's Distribution
Quote from: dr blowfin on August 08, 2017, 09:43:24 PM
I don’t get this ICO. Only just a little over 5% of this coin is circulating - the rest of the premine is held by skycoin. This is creating an artificially high price. 1 skycoin = 0.0012 on cryptopia right now. Yet the ICO price is 0.002!!! Good luck with that. There is no credibility here.
The whole point of this distribution was for the tech VC, whale cartel, and Korean/Japanese whales.
Its not for public.
Everyone is messaging and asking for a different price and wants large blocks OTC at discount to market and we do not have a uniform process for handling this. So we are testing policy of doing the larger OTC blocks above market, then using the bitcoin as automatic price support.
The starting ICO valuation was very high, making distribution difficult and we have several options.
- For instance, we may do ninja announcement of a coin burn of 80% of the coins (reducing total supply permanently to 20 million)
- We may hard cap coin distribution to 5% per year
- We many do network incentives at the maximum rate that will only half the coin price regression line, while targeting 20% or 30% distribution, before a hard-cap of 5% distributed coins per year
We are going to do series of OTC sales and distribution events up to 10% (from 5.8% currently).
Once we are at 10%, then getting to 20% is only a 2x dilution.
Then from 20% to 30% is only 50% dilution in price per coin. And we will see what effect distribution through incentives for network participation has (bbs, skywire, etc).
Then cap of 5% max per year.
The Critical Period
The critical and trying period for Skycoin is where we are now, going from 5.8% dilution and low volume to 10% distribution.
We are doing OTC sales with the whales, to build up a Bitcoin fund for price support to reach the 10% distribution milestone.
At the same time, we are going to build liquidity by listing on larger exchanges. And also launch the first applications for public:
- mobile wallet
- skycoin hardware for skywire network (skywire miner)
- bbs application
- viscript (orchestration and control for multiple skycoin/skywire/cxo nodes)
- CXO daemon (used by BBS)
So this distribution event is for people with too much money, who have researched the project, to buy 300 BTC blocks of Skycoin. Whales and VC, institutional investors, etc.
Also, for infrastructure testing. The existing ICO infrastructure will work for an OTC bot, so there will be a uniform process for handling OTC sales at spot price.
We did regression line and the price should have been at 0.002 weeks ago by now.
However, someone (we presume who bought a few dozen BTC of skycoin early on) keeps selling at the $4.00 price point and it is taking weeks to eat through however many Skycoin he has. And we have been watching this for weeks.
The demand is pretty constant and I assume he will run out of Skycoin eventually.
The problem right now with the skycoin markets is:
- no one who has coins want to sell (vast majority are buy and hold, long term and just keep buying at constant rate or when they can get a deal)
- the people buying are acquiring long term positions are doing so, without driving up the prices (they are buying over long term and consolidating positions, not doing panic/frenzy buying)
- the spreads are still massive
We tried injecting coins into the market at discount (30%) and then some of the people immediately sold the coins and so it drove down the price.
Then we tried small OTC sales at spot price. Which worked very well and the price per coin seemed to rise in the weeks after OTC sales and market cap increased a large multiple of amount of coins sold. I think from network effects and people promoting or tweeting. This also indicates that distribution for network activities will be very successful (like Steemmit did).
Now we are trying OTC above spot price.
The theory was that if we set the distribution event price at 0.002 BTC/SKY (500 SKY/BTC), that if it only took 50 BTC to move the market to 0.002 BTC that people would buy out the order book until the price rose to 0.002 BTC. Then this would produce a new price floor.
However, 20 hours in that has not happened yet and the price is still at 0.0012. So we will see what happens.
What did happen is that the liquidity/trading volume dropped. I think because people are not sure what will happen.
Then on the 15th, we will try a second distribution strategy.
Over the long term, the OTC distribution bot price will be reduced to be closer to the market spot price, but the number of coins available per day will be extremely limited. Where as the current distribution is significantly above market price but a very large number of coins are available relative to the existing market cap.
The total capital raise going from 5.8% to 20% distribution will be able 15 million or about 3000 Bitcoins. So I do not think the market cap is too high and there is still room for significant increase even during the distribution.
So the primary goals are:
- raise money for development
- raise money for price support and market making
- increase liquidity
- test and determine systematically what kind of distribution policy and rate is best for reaching the distribution targets, without driving down the coin price
Just like Bitcoin, we expect most of the price appreciation is going to be as the distribution rate tapers and during periods of maximum user base growth.
So we are trying to do this systematically and with a bunch of small experiments.
Once the applications are done, the Skycoin market cap might be at 50 million dollars.
- We will be able to calculate the cost per user acquisition and required user incentives for userbase growth
- We be going from 15% to 20% distribution to 30% distribution (probably through the network incentives) and therefore will have about ~25 million or 50% of the market cap for user acquisition/behavior incentives (like Steemit did).
- $25/user, 25 million, 1 million users, plus organic, etc…
- then ideally the skywire incentives are tweaked so the mean revenue per user (capital inflows), exceeds the cost per user over lifetime
That is the point where, the network is operating in a closed, internal economic cycle. Achieveing this closed economic cycle is one of the one to two year, higher order goals that development is directed towards.
If we can achieve the goals of a closed or self contained economic system, that would be a major milestone for crypto. We need to have producers and consumers and they need to be balanced out in a closed cycle.
The Steemit, Bitcoin and Ethereum model is not viable in the long term, because the mining rewards and incentive costs are being subsidized by a transitory capital inflow bubble into a new asset class (cryptos). Bitcoin would not be viable if the hundreds of millions of dollar a year of operating costs for the network, were being taken out of the pocket of the Bitcoin users directly as transaction fees. It is only viable with hundreds of millions of dollars of new external money, to buy out the new bitcoin being dumped to pay for the network operating costs.
This is why the Skycoin project focused the first four years on research into new mining algorithms to reduce or eliminate network operating costs.
Then, we know know that there will be thousands upon thousands of new coins over the next ten years, so we choose a protocol heavy niche, that we wont be displaced from and where it does not make sense for anyone to complete with us. While individual products and features can be copied or clone trivially (and will be), ecosystems and protocol standards cannot be copied and have the longest lock in and most sustainable advantage for this type of product.
You can see this clearly with Ethereum, where the primary usage of Ethereum has become launching ERC20 tokens. So while any coin is able to clone the Ethereum Virtual Machine and add turing complete smart contracts to Ethereum, it becomes much harder to clone the ethereum user community, the application ecosystem and the ERC20 ecosystem.
So we are building out the Skycoin ecosystem systematically and strategically along what we think will be best for the long term.