As we start the New Year 2024, here is a letter to future Crypto CEOs.
The temptation to pre-mine coins may be great, but unless they really know what they are doing, they better put the currency out of their crypto project.
Satoshi was the first and last of his name
I know you have been pondering the mystery of Satoshi at his laptop, mining that entire Genesis block by himself.
The cojones on that guy, right?
Mr. Nakamoto also pre-mined about 1,100,000 coins, locked them up and there they are. You can look at them for free, they are still there.
Mr. Craig Wright has also looked at them.
You might be thinking you can also just premine like Satoshi and a few lucky CEOs that came after him like Vitalik (Ethereum) and Shibetoshi (Dogecoin), but the world has dramatically changed since 2008, 2009, 2010, …, 2023.
The problem is there came a herd of CEOs who premine and “airdrop” their premined (garbage) coins to their loyal fanbase. Their projects were soon tunnelling into the ground, with billions of dollars of other people’s money up in smoke.
Examples include Do Kwon, Su Zhu and Kyle Davies, and Sam Bankman Fried who will be tried this year in March.
The reality is, if you can just premine on your laptop just like Satoshi, you are not going to be trusted nor followed to victory, you will be arrested.
Don’t piss off the SEC Regulator
Before I tell you about your arrest warrant, I’ll tell you why you shouldn’t get on the SEC regulator’s nerves.
The SEC regulator might now have the most hectic job in the financial industry.
Gone are the days of a banker, living by the simple 3-6-3 rule; Put 3% interest on deposits, charge 6% on loans and be at the golf course by 3 p.m. Now Mr. Gary Gensler has a lot on his plate. Like trying to decide if altcoins are securities or commodities.
Something that IMO will not be decided one way or another for decades to come.
Security means it is like a stock. With a simplistic analogy, somebody can create a lot of it and therefore they should be subject to the laws that govern the creation and disbursement of stocks to the public. Because a company could create stocks, sell them to the public, then pull the rug with an “oops, our business model wasn’t perfect. Our bad, but shit happens”.
Jail time.
Commodity means it is like maize. With another simplistic analogy, somebody can farm a lot of maize and therefore they should be subject to the laws that govern the growth and disbursement of maize to the public. A company can sell their maize to the public and if they say “oops, our business model wasn’t perfect. Our bad, but shit happens”, that is okay. Everybody knows maize is sometimes not very good. You should DYOR next time before buying.
Seriously, no jail time.
I’ll put it this way. You are hustled a little if you deal in commodities, and you are hustled a great deal if you deal in securities.
All this trouble for the SEC Chairman was started back in 2009 when the SEC realized BTC could not be stopped. Not even temporarily so that it, the SEC, can have a closer look.
Since then, a lot of cryptocurrencies cannot be stopped and a lot of money is tied up in the hairy complexities of the cryptocurrency market. Even the anti-Bitcoin banker Jamie Dimon has engineered a cryptocurrency project.
But Mr. Gensler shall not suffer fools. He has successfully slapped cryptocurrency CEOs with a litany of laws and regulations, one of them deeming altcoins securities. The thing with securities, it is illegal to pre-mine a ton in your basement and keep them secret from the SEC. A breach of Rule 105(B) of the Securities Exchange Act, which requires that you disclose all your financials truthfully and without fail.
So Mr. Crypto CEO, if you want to start a cryptocurrency project, do not premine unless you know what you are doing. If you ever premine keep the coins to yourself. Stop airdropping them all over Twitter or Mr Gensler might get word.
Don’t print money, build community
In Web2.5, community, not currency or content, is King.
One way I see to get around the illegal but sinfully alluring idea of premining, is synchronized mining with the mining done by a multi-partite arrangement.
I am speculating here.
This would be like mining a Genesis block in bits and pieces through a multipartite protocol. Hence, The Genesis block won’t be something in one laptop/server like Satoshi did, to be shared with all. It will be something that exists in multiple pieces working in tandem. One part fails, everything fails.
If it works, this encourages community building via what I could call proof-of-decentralization.
For example, imagine mining coins for community use e.g. as a reward for voluntary public works cleaning, garbage collection, and novel recycling innovations. To verify it is in different devices within the same community, time stamps are coded-in that synchronize with GPS coordinates and people’s SIM cards.
This discourages the hoarding of coins and further encourages the spreading of them far and wide. After all, if you are building a community you believe in, why not start with a foundation of equal opportunity for all? And nothing could be more equal opportunity than equal mining rewards for all.
Finally, a supply cap should be put in (coded via proof-of-decentralization as well) because we really should be allergic to inflationary currencies. I still wonder why new altcoins must still be inflationary. Even Worldcoin. Mr. Sam Altman is an AI-building genius but with economics, I’m not so sure.
All it takes is the equivalent of a stock split / turning a gold bar into gold dust, if the coins going around aren’t enough.
It does take a certain attitude towards sharing with all, but if you do build a great thing, they will come. With all their different currencies.
P.S. >> Proof-of-decentralization is cheaper in terms of energy consumption than proof-of-work. The former is a community-adhesive while the latter is a meritocratic way to guarantee fair market competition. Community building is not a competitive process, for it is unethical to compete against the wise elders, or even the younger people in that community that look up to you.