Preview: A brief history of greed and excess
How the pyramid scheme reinvents itself over and over in crypto
In recent weeks the number and diversity of new coins and new financial schemes has started to hit a fever pitch very reminiscent of the height of the ICO era. A number of readers reached out to ask variations of "How did we get here?"
This is the first of a series tracing the history of fund-raising in crypto from the Bitcoin whitepaper to the rise of TikTok memecoins. In this section we’ll discuss the early history of alt-coins through the Ethereum ICO and the dawn of the Smart Contract era.
In the beginning there was innocence
An interesting and perhaps not obvious thing about Satoshi is that he wasn’t interested in acquiring money. One way we know that is because he mined ~1.1M bitcoin (~$60.5B at time of writing) and never spent any of them.1 Another way we know that is through how hard he worked to ensure that he did not have any special privileged access to Bitcoin, even indirectly. Satoshi wanted Bitcoin to be equally available to everyone.
So Satoshi never gave himself an extra cut or a head start. He took no payment for his work and he raised no funds. He mined all his coins as an equal peer on the network and he announced the idea of Bitcoin to the cypherpunk mailing list several months before actually starting the network. The reason Satoshi has more bitcoin than anyone else ever will is not because he was the founder, but because he believed in it the most. He mined the majority of his bitcoin in an era when mining wasn’t a profitable act but a charitable one.
No such thing as a fair launch
This style of distribution where the initial supply is zero and the launch is public is known colloquially as a fair launch, and for a while it was the norm. The consensus view at the time was that decentralization could be lost but it could never be added, so fair launches were viewed as necessary to preserve that ideological purity. Early altcoins like Namecoin and Litecoin launched this way, giving their founders no special privileges.
But perfectly fair launches were no longer possible - now that the market understood cryptocurrencies Bitcoin’s year long grace period before price discovery would never happen again. And it wasn’t totally clear how much the market demanded fairness over price performance - so attempts at fair launches weren’t the norm for very long …
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