"Fair Initial Token Distribution and the Challenges of Consumer Product Metrics"

"Fair Initial Token Distribution and the Challenges of Consumer Product Metrics"

Introduction:

In the world of decentralized networks and consumer products, there are important considerations to ensure fair distribution and optimal usage. This article explores the concept of fair initial token distribution for decentralization and the challenges faced by consumer product metrics.

Fair Initial Token Distribution:

To achieve optimal decentralization, a fair and efficient initial token distribution is crucial. This entails a reasonable number of individuals holding the token, with the number increasing proportionally with the project's market cap. Additionally, it is important to ensure that the biggest token holders do not possess an overwhelmingly large majority of tokens. Large price discrepancies to acquire tokens should also be avoided.

Scope of Token Distribution:

The decentralization of a token's distribution varies in importance and effect depending on its role within the network. While token distribution may not directly impact the safety or performance of a blockchain, it plays a significant role in network security, resilience against Sybil attacks, long-term sustainability, incentive alignment, and governance.

Examples of Token Distribution Models:

Bitcoin, as the first blockchain network, distributed its BTCs as a reward for mining blocks using a Proof-of-Work (POW) algorithm. The distribution model of BTC can be considered fair, as early contributors received better rewards during the low competition phase. Zcash, on the other hand, follows a similar monetary base model as Bitcoin but reroutes 10% of all rewards to stakeholders in the ZCash company, ensuring long-term alignment. Ethereum, an early ICO, had a significant portion of its total ether premined and distributed to investors. It later adopted a POW mining reward distribution model similar to Bitcoin.

Efficient Distribution Mechanisms:

Creating efficient distribution mechanisms is crucial to involve relevant actors in the network. For example, the EDG token can only be obtained by locking Ether in the Ethereum smart-contract, incentivizing those genuinely interested in the project to contribute early-on. This mechanism aligns incentives without requiring direct investment.

Challenges of Consumer Product Metrics:

Consumer product metrics often face challenges in terms of user engagement and retention. It is common for a significant percentage of users to refuse to sign up for a product, and even among those who do, a majority disengage and become inactive over time. Mobile apps may have better engagement metrics but lower upfront conversion rates. To improve engagement, it is essential to tie the product into users' pre-existing behaviors rather than asking them to adopt something new.

Importance of Engagement and Frequency:

Engagement and frequency are critical metrics for consumer products. A successful case often sees more than 10% of total users coming back daily, although more often it is 5% or even lower. Creating a healthy and dynamic news feed becomes challenging, especially when a small percentage of users contribute content.

The Impact of Network Effects:

The success of a consumer product heavily relies on network effects. A significant percentage of users may not know anyone else in the service, necessitating the need to backfill their feed with content. Instagram, for instance, had 65% of its users disconnected from anyone else, highlighting the challenge of creating a vibrant and engaging user experience.

Conclusion:

In conclusion, fair initial token distribution is essential for optimal decentralization, network security, and long-term sustainability. Efficient distribution mechanisms can incentivize relevant actors to contribute to the network's health. In the realm of consumer product metrics, challenges persist in terms of user engagement and retention. Tying products to pre-existing behaviors and focusing on engagement and frequency can improve the overall user experience.

Actionable Advice:

• 1. Prioritize fair initial token distribution by ensuring a reasonable number of individuals hold the token and avoiding token concentration in the hands of a few.

• 2. Create efficient distribution mechanisms that incentivize relevant actors to contribute to the network's growth and sustainability.

• 3. Focus on user engagement and frequency by tying products into users' existing behaviors and continuously improving the user experience.

By addressing these considerations and challenges, decentralized networks and consumer products can strive towards optimal decentralization and user satisfaction.