Sep 29, 2022 - Economy

From bitcoin to YFI: the myth of the fair launch

Illustration of a rocket emitting dollar signs

Illustration: Sarah Grillo/Axios

Bitcoin had an immaculate conception, in that the conditions of its launch can never be replicated. That's mainly because no one cared about it then, which — looking back — has been a real boost to its credibility.

Why it matters: The distribution of any new form of money is important. The more people who have it and use it, the more people each person who has it can transact with. Money needs a big footprint. When a new cryptocurrency launches, creators put a lot of thought into how to get it into as many hands as possible (and outsiders put a lot of thought into how to game its distribution).

Flashback: In July 2020, Yearn Finance, which works as a sort of advanced savings account for decentralized finance, decided to turn over its keys to users by giving out a governance token to people with deposits on the platform.

  • This was the first launch that got the moniker of a "fair launch" because none of the tokens, called YFI, were set aside for Yearn's creator, Andre Cronje.
  • Cronje had some funds in Yearn, so he earned a little YFI, but on the same terms as everyone else. Thus it was "fair."

Yes, but: How fair was the YFI release in practice?

  • Before Cronje announced YFI, Yearn stewarded a bit over $8 million. Shortly after he announced the token, deposits shot up to over $300 million as deep-pocketed investors plowed in funds — not because they actually wanted to use it, because they wanted YFI.

Looking back, other launches have been dubbed "fair." For example, bitcoin. It has only ever been earned by people who were mining it. Anyone could join from day one, though few did for years.

  • Yearn was different than bitcoin, because people didn't understand bitcoin when it launched, and even those who did doubted it would work.
  • By the time YFI was created, people had a handle on how to value tokens, so, by September 2020, YFI was trading at over $40,000 each.

Zooming out: Other blockchains that work like bitcoin have tried to emulate the fairness of its launch, but the world has changed.

  • Whereas Bitcoin launched with maybe a couple laptops running it, one investor estimated that Grin launched with $100 million in mining equipment ready to grab as many early coins as it could.

Fair in design? Yes. In fact? Not so much. Now the whole blockchain has a marketcap worth around $8 million.

The "fair launch" meme lives on. Just last month, a DeFi project named (which offers investment automation, similar to Yearn) distributed tokens in what it described as a $26 million fair launch, using a liquidity pool on Binance Smart Chain.

  • To maximize fairness, crypto researchers Hasu and Arjun Balaji argued that new forms of money should put a lot of effort into public awareness and give folks a lot of time to get in to be as fair as possible.

What they're saying: "The concept of 'fairness' is ultimately subjective and a 'perfectly fair' launch [is] a pipe dream," they wrote.

The bottom line: No one knows if any new form of money will catch on, and there will probably always be sour grapes from some once any of them do.

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