the myth of the fair launch

Bitcoin had an impeccable conception, in that the conditions of its launch can never be replicated. That’s mainly because nobody cared about it then, which – in retrospect – has been a real credibility boost.

Why it’s important: 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 trade with. Money needs a big footprint. When a new cryptocurrency is launched, the creators think a lot about how to get it into as many hands as possible (and outsiders think a lot about how to game the distribution).

Flashback: In July 2020, Yearn Finance, which acts as a sort of advanced savings account for decentralized finance, decided to hand over the keys to users by issuing a management token to people with deposits on the platform.

• This was the first launch to be labeled 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 some 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 managed just 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.

Look back, other launches have been called “fair”. For example bitcoin. It has only ever been earned by the people who mined it. Anyone could join from day one, although few did for many years.

• Yearn was different from bitcoin because people didn’t understand bitcoin when it was launched, and even those who did doubted that it would work.
• When YFI was created, people were in control of how to value the tokens, so in September 2020, YFI was trading at over $40,000 each.

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

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

Fair in design? Yes. Actual? Not so much. Now the entire blockchain has a market value worth around 8 million dollars.

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

• To maximize fairness, cryptoscientists Hasu and Arjun Balaji argued that new forms of money should put a lot of work into public awareness and give people plenty of time to come in to be as fair as possible.

What they say: “The concept of “fairness” is ultimately subjective and a “perfectly fair” launch [is] a dream,” they wrote.

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