By now, most everyone in the crypto world heard about the airdrop by 1Inch. This is another example of a DeFi platform sending tokens out to its users for governance. This was the trend the second half of 2020 and will surely continue going forward.
Earlier in the year, Uniswap did the same thing, sending 400 UNI to each user.
This is a model that is rather unique to cryptocurrency. In the present system, governance is spread out but usually to shareholders. While it is possible that some of the users/customers are also shareholders, for the most part it is an entirely separate group. Often the largest customers are not the biggest shareholders.
Hence, those who govern the company/platform are different from those who utilize it. The same holds true for the profits.
What we are seeing in DeFi, as well as the entire crypto space in general, is a brand new model where the users are the ones who derive the majority of the benefit. Thus far, a lot of it extended to the financial end of things but we are now seeing how governance is entering the picture.
Governance leads to power. Naturally, some use it responsibly while others abuse it. However, there is little debate that those with the power to govern influence the lives of many.
When those governing are different from those who utilize whatever is being governed, there tends to be a misalignment of goals. Self interest takes over which is something that tends to drive parties in different directions. Thus, the idea of getting stakeholders with opposing interests to agree is misguided. In the end, someone ends up taking a larger share, usually at the expense of others.
In a situation where governance is done by those who utilize and have stake in a system, we see the interests align. Certainly there is room for debate and methods to achieve an end; people are not going to agree on everything. However, users will likely have a very similar outlook as compared to those who are just involved in something as an investment.
On Christmas Day, 1Inch decided to dole out its governance token. Since governance carries great wealth, tokens of this nature can be valuable. As one user found out, it can also be extremely profitable.
According to data from on-chain analytics provider Dune, the highest recipient of the free token distribution received 9,749,686.003 tokens that were worth about $27.5 million at the peak price of $2.8 per token.
That is a nice Christmas bonus to say the least.
It also shows how we are generating enormous wealth in the crypto-sphere. Each new project has the ability to tokenize, bringing financial value to its users and investors. Often, in an effort to grow their user base, tokens will be sent to people as an incentive to get more involved with the platform.
On Hive, we are going to see a year long situation play our with the application 3Speak. Each person who is holding HIVE will be part of the claimdrop. This is a 1:1 drop of the mining token, LARYNX, for each HIVE held.
The mining token obviously allows one to receive another token, the SPEAK. This is the governance token that can be staked to earn the "gas" token called the BROCA. We are also going to see a Proof-of-Brain token tied to the system, the details which have not been released.
Why is this being done?
In truth, it is to incentivize people to get involved in the network. This is being formed in a decentralized manner. There is no desire for this to be operated in a centralized construct. Thus, large numbers of people need to be involved.
We see this is a radical departure from the present economic system. With a public corporation, as an example, we do not see this economic model. The users/customers are given incentives through sales and things of that nature. They do not receive governance or ownership stake in the company. Employees might partake in that to a degree although that is mostly relegated to upper level management who is commanding the high salaries anyway.
Here we see a different scenario. Everyone, regardless of their holding, is receiving something. In the 1Inch situation, anyone who utilized the platform before a certain date received the airdrop.
Both these situations reflect something vital about the new model: the greater the participation, the better the rewards. With 3Speak, after the initial claim, rewards are based upon activity within the network. Those who are active providing storage space as well as uploading content will participate in the ongoing rewards.
We are seeing the situation similar to central banks. All these projects are creating money "out of thin air". The major difference is the newly "minted" money is not being distributed through a banking system, only reaching the general population through debt.
Instead, all this new money is going directly into the hands of individuals. The new tokens arrive in people's wallets, providing them with the wealth enrichment immediately. There are no strings tied to it. The individual/group that got the $27 million from 1Inch does not have a note tied to that money. There is nothing to pay back.
Try getting $27 million from a bank without taking on debt. Of course, you will be dealing with a commercial bank at this level since the money creator, the central bank, won't even talk to you.
Here is the impact the 1Inch drop made:
In total, over 55,200 addresses are eligible to claim the free 1INCH tokens with more than half of the coins already claimed according to Dune. The average token sum across these addresses was about 1,629 tokens with qualified addresses assured of at least 600 tokens.
It is likely more than 50,000 people received at least $1,200 based upon the $2 price of the token. Moving forward, this can go up or down depending upon what the market dictates. If this platform becomes a lot bigger, the token holders stand to have a fairly nice payday due to token appreciation.
What did it cost them to receive that? $0 extra. They were already transacting using the platform so this is a bonus.
Understanding how this is unfolding is the key to determining the effects that cryptocurrency and tokenization will have in the future. Since we are dealing with a direct system, this same tactic will be repeated millions of times. Entities that have users will look to reward them while also incentivizing them to conduct some behavior.
Now that we see the basics, one can simply extrapolate things out to guess what the size of all this will be. Decentralized platforms will need to provide for some form of governance. To do this, a similar path is going to need to be followed. While systems used will vary, in the end, anything that is decentralized needs to account for how it will be governed. This is another area that we are just starting to innovate with.
Having a say in what is taking place is very valuable. Large sums of money are spent in the present system to "get a seat at the table". This is why politicians, often not making an excessive salary, end up very well off. Their power is sought after, sadly leading to corruption.
While there is nothing that says corruption will not crop up under this new system, we are working on different approaches that can root that out. There will obviously be some failures that make headlines. However, over time, it is likely that effective means of governance will emerge.
Nevertheless, one of the greatest benefits to this is that the wealth is being generated into the hands of a lot of different people. Instead of the select few, those who are very active in crypto projects are finding opportunities to benefit financially. This is one of the best defenses against abuse. If the wealth is spread out, the "elite" have less ability to overrun the system and force their will.
The goal of any system should be to get to this point as quickly as possible. Going forward, centralized platforms will be shunned. People are simply not going to build their businesses or spend their time on those chains where there are a bunch of oligarchs running things.
In the end, it is likely that decentralization becomes a survival mechanism. Those that fail to meet this criteria are going to see their platforms collapsing as users shun them.
This is going to teach people a very expensive lesson about greed.
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