As measured by its exchange price and the depth of its order book (called “liquidity”), the value of any cryptocurrency is most closely tied to its distribution, a term to describe how dispersed the currency is among the population. Common experience reveals that wider dispersion results in more acceptance among vendors for goods and services. This wider acceptance causes greater demand and therefore buy-side pressure that pushes up the price.
Among the cryptocurrencies that have focused primarily on distribution, only a handful have also incorporated participation in the cryptocurrency’s economy into the distribution model. Breakout Coin (BRK) is one such cryptocurrency. The central component of the Breakout Coin business model is a program that loans up to seven million BRK to businesses that will accept it for their products.
The first participant in this program is Breakout Gaming, which will have numerous entertainment offerings (known within the gaming industry as “verticals”), including eSports, poker, a casino, and a game store. Adoption is encouraged through promotions, which also spur participation in the BRK economy. BRK will be distributed through free tournaments and contests in the poker, eSports and fantasy verticals, as well as being provided to individuals for referring others to the Breakout Gaming properties, for providing Breakout Gaming with positive social media promotion, and through personal distribution by Breakout Gaming’s network of professional player representatives.
This model for achieving wide distribution by encouraging direct participation in a cryptocurrency’s economy has also been employed by the crypcurrency called Steem. Because Steem focuses on being a decentralized social media platform, participation in the Steem economy involves making posts and voting on them in a process called “curation”.
The success of focusing on participation is evident in the recent increases in STEEM price, rising from about $0.30 one week ago to $4.29 as I write this post. This represents an increase of market capitalization from about $15M to about $360M.
Both Breakout Coin and Steem have reward allocations that are distributed to drive adoption. The Breakout Coin reward allocation is about 40% of the total supply. Breakout’s allocation will be distributed over the course of several years, throttled by loan disbursements to Breakout Gaming and potentially other businesses. Similarly the Steem reward allocation will reach about 40% of the total supply after about two years, throttled by a blockchain reward mechanism. It may seem as if 40% of the money supply is large, but recent STEEM price increases suggest otherwise. In fact, 40% may be a sort of golden mean that optimizes adoption.
Breakout Coin and Steem have other similarities as well. Both are split into a blockchain technology (Breakout Chain and Steem) and a business operation that actively promotes adoption (the Breakout Coin company, and Steemit, respectivley). Additionally both use several currencies that support a main currency. Breakout Coin has two coins dedicated to securing the blockchain. The first is Sister Coin (SIS), which is mineable using proof-of-work. The second is Breakout Stake (BRX), a proof-of-stake coin that mints BRK. Each BRX can be thought of as a BRK “miner”. Because they are electronic assets, BRX have tremendous advantages over hardware miners in that they can be transferred to a new owner almost instantly. Additionally, they never wear out or need repair. The currencies of Steem are STEEM, a highly liquid currency, STEEM-backed dollars (SBD), and an inflation-protected currency called VESTS. Steem Rewards are distributed in the latter two currencies while STEEM’s role is mostly to provide a mechanism for interconversion.
Cryptocurrencies have experienced several major phases of evolution since bitcoin was released in 2009. The first phase was the advent of a functional decentralized cash, namely bitcoin itself. Further phases were proof-of-stake, multiple tokens with NXT and Counterparty, smart contracts with Bitshares, and finally Turing complete distributed applications with Ethereum. The current phase includes encouraging adoption by rewarding users for participation. Because the Breakout Coin plan for distribution has been in development for nearly two years, it is a leader in applying this strategy.