In my second installment of Gridcoin Issue Breakdown, I want to talk about the issue of "wealth" disparity.
A major topic of conversation in Gridcoin recently deals with what we in the crypto world refer to as "whales," or investors who hold vast quantities of coin. In Gridcoin we have a handful of them, to the extent where the top five CPIDs on the Gridcoin blockchain hold about 136 million coins (approximately 35% of all circulating Gridcoin).
Are the rich really rich?
Before I say anything else, understand that I hate referring to Gridcoin whales as "rich." As recently as January of 2017, someone holding 1 million Gridcoins had a whopping $5,000 USD in value. It's not exactly yacht money. And to further complicate matters, trying to sell 1 million Gridcoins at one time back in January wouldn't have yielded you $5,000 anyway because the trading volume back then was generally less than $5,000 in any given 24-hour period. Realistically a sale of that magnitude in January would have likely halved the daily trading price and you'd have been lucky to get 2/3 of the $5,000 you hoped to get.
Those days are hopefully long behind us, with Gridcoin trading volume in the hundreds of thousands USD each day, liquidity is much better now. Even at today's prices, 1 million Gridcoin is not worth an amount ($25,000) that you're going to be out buying Lamborghinis with. So I think before we start adopting (United States) federal politics and calling for class warfare, it bears keeping in mind that most Gridcoin whales are probably in the same social class you're in.
Are the rich getting richer?
The answer to this question is a definitive "no," and I can prove it mathematically. Actually, it's already been done when 
In that article,
The current coin supply is 390,287,782 GRC and one can easily calculate the current yearly monetary inflation:
approx. monetary inflation through PoS: 0.015 x coin supply = 5,854,316.73 GRC
yearly paid PoR reward: 365 x 48000 GRC = 17,520,000 GRC
As you can see, the amount of annual coins minted through PoR is a full three times the amount of annual coins minted through PoS. Keep in mind that all Gridcoin miners earn PoS, but most of the largest wallets (the whales) do not earn PoR. Part of
's article is pointing out that in approximately 30 years, the PoS interest will exceed the PoR rewards, so while that's perfectly relevant for his proposal (again, you should read it), it also helps me prove my point that even if nothing changes at all with regards to the rewards system, the wealth distribution is guaranteed in design for people who are only earning GRC through PoS to "lose ground" against people who are also mining Gridcoins.
Please do not take this to mean that I do not support changes being made to the rewards mechanism (specifically, I support fixed block rewards and some sort of increased/scaled increase of PoR rewards as more miners continue to join Gridcoin). I am merely pointing out that any concern of wealth disparity is literally, mathematically, improving by the day.
How does Gridcoin's wealth disparity compare to other coins?
Let me pick five coins at random and use the exact same metric (IE: top 5 holders of said coin hold X% of total supply)?
- Golem (GNT): Top 5 holders hold 54% of total supply
- DigiByte (DGB): Top 5 holders hold 34% of total supply
- BlackCoin (BLK): Top 5 holders hold 25% of total supply
- CureCoin (CURE) : Top 5 holders hold 51% of total supply
- PeerCoin (PPC): Top 5 holders hold 26% of total supply
You can browse around using sites like CryptoID to check out the wealth distribution of many coins. What you'll find is Gridcoin is indeed on the high end of the spectrum overall, but that coins with a smaller market cap like Gridcoin ($10 million currently) tend to have a handful of wallets that hold a lot of the coin.
What are the benefits of having whales?
There are a handful of benefits of having some good whales on your team, starting with the fact that they're holding a lot of the coin and thus contribute to the stability of the coin. Simply put: it's a portion of the supply of coin that's generally not for sale and while it counts as "circulating supply," it doesn't circulate nearly as often as the rest of the coins in the supply.
Large holders of coin also are often active in the development/governance of the coin due to their high stake in the coin's success. Gridcoin, in particular, has quite a few people who would fall under the "whale" category who put serious time and effort into helping new users, contributing to development, etc.
What are the risks of having too many whales?
The primary reason to be concerned with wealth disparity, particularly in a smaller coin, is because at any time a large holder could choose to liquidate millions of coins. As a result of that act, the value of the coin could be drastically reduced in a single day. This is of particular interest for a coin like Gridcoin that has a market cap of just about $10 million USD.
There are certainly also concerns with large holders of Gridcoin resulting in blockchain poll results that go against the will of the vast majority of individual Gridcoin holders because your voting weight is based on your magnitude and how many coins you hold. I personally believe this issue is overblown, considering these individuals have more stake in the success of Gridcoin than anybody, and thus they are not likely to cast votes that they believe are harmful to the coin.
But did you know this big secret?
I have also been approached by multiple people in hushed tones talking about the conversion from Gridcoin Classic to the current Gridcoin, which included Gridcoin Classic holders receiving 10 Gridcoins for every 1 Gridcoin Classic coins they held (better known as a 10:1 reverse split). Some people believe that the people who were around during this split received some sort of unfair advantage over people who are just joining Gridcoin today.
That's just a misrepresentation of what a reverse split does.
In a reverse split, the new shares (or coins, in this case) do not magically cause the stock (or market cap of coins, in this case) to become worth twice as much. There is occasionally a little benefit involved, and I understand those holders essentially experienced approximately a 10% boost in the USD/BTC value of their holdings when that split took place, which is peanuts in the crypto world. This is to say if I held 1 GRC during that time that was worth $0.10 USD, after the split I would have held 10 GRC worth about $0.011 each, or about $0.11 USD total.
Even people who joined Gridcoin in the six months after the reverse split took place were able to buy in at $0.006 (a little more than half a penny USD) per coin before Gridcoin received its first major boost in price beginning in July of 2015.
So was there a 10:1 reverse split that took place years ago? Yes. Does it contribute in any way whatsoever to wealth disparity of Gridcoin? It does not. Again, this is yet another thing that can be proven using mathematics and removing emotion from the equation.
How can Gridcoin improve the wealth disparity situation?
As I stated earlier, I am a fan of a fixed block reward for PoS. The short version of this proposal is that it would effectively eliminate the 1.5% interest that everyone earns on their GRC holdings and replace it with a fixed amount of GRC minted through PoS for each block staked. This would force the largest wallets to either stay online 24-7-365 to earn their PoS rewards (and thus contribute to the security of the Gridcoin blockchain) or they simply would earn little/no PoS rewards and all those would instead be redistributed to the people (largely miners) who are actively staking 24-7 and contributing to the blockchain.
The other issue that needs to be addressed is the PoR (mining) rewards. Even at 3x the PoS rewards, there is a growing belief that these need to be increased further. I am an avid proponent of a scaling system which increases the daily PoR distribution each month commensurate with how many active CPIDs are on the system. This would address the logical problem of "more miners = fewer GRC per miner." I would not recommend a 1:1 relationship between increased miners and increased PoR rewards because we need to rely on the price of Gridcoin to rise to solve part of this issue, but even some level of growth commensurate with a growing number of miners would help satisfy this issue.
What do you think? Feel free to comment below. I love hearing ideas from other Gridcoiners!