ICDs help to align in the stimulus of stakeholders

ICO, token, money

In an ICO, ICD, Crowdsale or similar, the developers usually define some parts of the tokens for themselves. It has sense because it helps developers align their incentives and act as a reward for a job well done.

A smart contract does not only make the developers into millionaires for a night but instead is a means of creating the right incentive environment to encourage long-term commitment to the success of the project. It's necessary for Core team members to have enough resources to survive and in different environments, the costs of survival may differ but these costs are finite. Developers also need the possibility to get rich as a motivation, but this does not mean getting rich in one day.

Vesting periods.

A vesting period assigns a specific quantity of tokens locked in a smart contract to be distributed at a fixed rate. This rate can be corrected within a range by stakeholders as can be the case with delegated Proof of Stake (DPOS) or it can be set in stone for all time.We can see now how it can work at the RLC token distribution for the iEx.ec project:

The rate:
For every term release 250,000 RLC to both of the founders.
A total of 500,000 RLC per season to the founders. A maximum of 2 million tokens is going to be released to the founders out of 86,999,784.

We can assume each RLC is only 25 cents then at 1 million RLC a year it is about $250,000 half of which goes to each founder but if we assume each RLC is going for $1 or more then it's $250,000 a season or $1 million to each founder over four years. It's clear that this would make each founder at finally a millionaire if they can deliver enough value to put RLC at $1 and keep it there.

This alignment of stimulus is critical to keep the founders on the same stage and one of the aspects about iEx.ec that really impressed me is that the founders voluntarily agreed to accept a vesting period of 6 months before every payment. This, in my opinion, it is a very good recommendation.
Variable rate vesting periods

Sometimes we can have benefited from less predictable vesting periods. A team member or community would know when they power up or accept vested stakes that the rate of release can vary. There would be a maximum on one end of the spectrum and a minimum on the other end but the stakeholder would have no way to predict the exact time or rate of the release of their tokens. In this case, the release pattern would be more like mining, where sometimes a big summa would be given once, and sometimes a trickle, but everyone would know by the end of the year they'll get the total summa.

Conclusion

An ICO or ICD which determines a large number of tokens for the founders without any vesting period is very dangerous for investors. Let's see you put your money into a token where founders have 10% of the tokens, with no vesting period, then you're putting yourself at risk of being a side on by the founders themselves.

Vesting periods force the founders to force to the plan and keep all members as equal in the game. Dumping happens if there are some token holders who hold a lot of tokens before everyone else, the result is giving founders a high percentage of the tokens by default with no vesting period. The compromise is to give the founders a high percentage of the tokens but to lock them up for 2 years.

A list of additional possibilities for locking them:

Legally, the tokens being locked up for 2 years will possibly result in a long-term capital gains rate instead of short-termĀ if they are locked up In the situation where the SEC or anyone else sees the tokens as securities, then there is less risk from the SEC.

Tokens which are locked up in reality perceived as safer. This is not attractive for hackers to go after tokens which are locked up for 6 months or 2 years because hackers are impatient but if millions of tokens can be released instantly.

When AI comes to cooperate with the blockchain then maybe an AI could demonstrate the initial token distribution. This automates the token distribution to my opinion to a greater degree, and also the AI itself could determine the rate of release due to its own criteria and not ours. This would allow using machine learning, to determine what the best incentive structure really is, based on many examples.

 

 

 

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