Ethereum merger is about to review the crowdfunding data 8 years ago and the current supply ratio

Editor’s note: Buterin revealed at the EthCC conference in Paris that Ethereum’s developers are working on five long-term phases aimed at improving the network’s overall capabilities. The first item on the agenda is The Merge, which is 90% complete and just needs to be tested on Ropsten. Once the “merge” has successfully occurred, validators can withdraw their ETH locked in the ETH 2.0 deposit contract.

Ethereum crowdfunding 8 years ago

After years of testing, research, and development, there is excitement about the potential timeline for Ethereum’s planned transition to proof-of-stake (PoS) via The Merge . The merger, arguably the biggest protocol-level change in Ethereum history, eliminated mining and introduced a validator system, where validators would stake their ETH to earn rewards for creating and validating new blocks.

Tracking ETH supply continues to attract attention as ETH holdings directly determine a user’s ability to participate in PoS. At the same time, moving to PoS will also introduce a new ETH issuance model and affect ETH’s monetary policy. However, to better understand the current supply of Ethereum, observers need to go back to the year before the launch of the Ethereum network, the critical period from July 22, 2014 to September 2, 2014: ETH crowdfunding. 

This article will review the data of ETH crowdfunding through ATLAS data from Coin Metrics. While reviewing the data behind the sale, current genesis accounts (those who participated in crowdfunding) were also checked.

Background introduction

How should cryptocurrencies be initially distributed? The question has been a source of debate for years. There are now many initial release models with different amounts of rewards for early adopters and contributors, resulting in stark differences in supply distribution.

For Bitcoin, Satoshi Nakamoto solved this problem when he released the first version of the Bitcoin code in 2009:

You can run a node and generate blocks by asking someone to send you some coins, or by opening Options->Generate Coins. I set the proof-of-work difficulty to be very simple, so a normal computer will be able to generate coins in just a few hours for the first time.

Anyone can download Bitcoin’s open-source software and contribute computing power to secure the network in exchange for newly minted BTC. According to Bitcoin’s supply schedule, the first 50 BTC were produced in the genesis block, the same amount as any other block, until the block reward dropped to 25 BTC during the first halving in 2012 (interestingly, The 50 Genesis coins were unusable and proved to be lost).

Since then, new models have been tested as Bitcoin has proliferated as an alternative to cryptocurrencies. In 2013, Mastercoin (MSC), the predecessor of Bitcoin’s Omni layer, launched a fundraising campaign using Bitcoin as a crowdfunding platform. Anyone can send BTC to a specified address and receive a certain amount of MSC at a pre-determined rate. The project raised more than 5,000 bitcoins at the time, worth about $500,000. And the success of this model will also pave the way for Ethereum’s high-risk ETH crowdfunding in 2014.

Ethereum merger is about to review the crowdfunding data 8 years ago and the current supply ratio

What looked like during the summer 2014 ETH crowdsale (source)

Like Mastercoin, Ethereum crowdfunding trades BTC for ETH. When Ethereum launched the following year, participants in the crowdsale were promised to distribute ETH. By using Bitcoin as a crowdfunding platform, anyone in the world can theoretically participate. Author and Defiant News founder Camila Russo sums up the profound implications of ETH crowdfunding in her book, The Infinite Machine, which offers a brilliant description of Ethereum’s roots :

“Before, anyone who wanted to buy stock in a big tech company like Facebook or Google needed a U.S. bank account; for those who wanted to invest in startups that didn’t raise money on the public markets, things got more complicated. Now , anyone can become an investor in one of the cutting edge tech companies. All they need is an internet connection and at least 0.01 bitcoin.” 

The crowdfunding was launched on July 22, 2014 and is planned to last for 42 days. So far, Vitalik and other early contributors have presented the Ethereum vision to the world, most notably with the 2013 Ethereum white paper and a talk at Bitcoin Miami 2014 in January of that year.

Crowdfunding has an interesting set of incentives for those willing to participate early. In the first two weeks of the sale, 1 BTC can buy 2000 ETH, after which the price changes linearly, eventually each BTC can buy 1337 ETH. The chart below shows the price of ETH in BTC to show the discounted price of ETH in the initial stage of the crowdsale and the price increase from the 14th day to the 36th day of the sale.

Ethereum merger is about to review the crowdfunding data 8 years ago and the current supply ratio

Source: Terms and Conditions of Ethereum Genesis Sale

At the time, using Bitcoin as a crowdfunding mechanism was a novel experiment on many levels. However, one consequence of crowdfunding on a public ledger is that we can easily access this rich dataset of contributions years later. Unsurprisingly, the data has been the subject of considerable scrutiny so far — most intensely, a 2018 remark by Preston Byrnes and a data-driven follow-up analysis by independent cryptocurrency researcher Hasu.  

Bitcoin “Exodus” Address Statistics

The graph below shows the total amount of BTC sent to a Bitcoin address (36PrZ1KHYMpqSyAQXSG8VwbUiq2EogxLo2) controlled by the Ethereum team (called the “Exodus Wallet”). Notably, this address was one of the most valuable multisig addresses at the time.

It also shows the total amount of BTC and USD equivalents raised and the total amount of ETH sold during the crowdsale. Raised over 31,000 BTC, worth about $18.3 million, and sold a total of 60 million ETH (making Ethereum the second-largest crowdfunding campaign at the time).

Ethereum merger is about to review the crowdfunding data 8 years ago and the current supply ratio

Source: Coin Metrics ATLAS and Coin Metrics Reference Rates

Of the 60 million ETH sold, about 50 million were sold in the first two weeks of the heavily discounted price — a notable spike in sales early in the sale and on the last day of buying 2,000 ETH per BTC.

Between the minimum purchase amount of 0.01 BTC and the maximum purchase amount of 500 BTC, there are a total of 8437 transactions (although theoretically there is no way to limit contributors from splitting larger amounts into multiple addresses). The three largest purchases were 500, 466 and 330 BTC. The average purchase volume is 3.65 BTC or about 7000 ETH.

Ultimately, given the pseudo-anonymity of Bitcoin addresses, it’s hard to tell more about the participants, but these results provide valuable insight into one of the most important events in cryptocurrency history to date.

Current crowdfunding supply ratio

In addition to the 60 million ETH sold in the crowdsale, early ETH contributors received an additional amount equivalent to about 10% of the total ETH sold, with about 10% set aside for the Ethereum Foundation.

This means that the total supply of Ethereum at network launch was around 72 million ETH, spread across 8893 addresses. But as additional ETH is distributed through mining, crowdfunding participants and early contributors control a smaller and smaller percentage of the total supply over time. The total ETH supply today is close to 120 million, and nearly 50 million new ETH has been issued since genesis.

Ethereum merger is about to review the crowdfunding data 8 years ago and the current supply ratio

Source: Coin Metrics Formula Builder  

Note that the graph above is only for comparison with Proof of Work (PoW) issuance over time and does not reflect the distribution of its tokens over time by the Genesis account. In other words, the set of accounts controlling 72 million ETH has been changing and growing since Genesis.

Over 92% of Genesis accounts have moved their ETH so far, only 693 accounts have never moved their ETH so far (the largest being 0x2b6ed29a95753c3ad948348e3e7b1a251080ffb9ETH, which controls 250,000 ETH).

Looking at all the genesis accounts, by the amount of ETH held today, the largest is 0x1b3cb81e51011b549d78bf720b0d924ac763a7c2, which controls 347,000 ETH (about $530 million at today’s ETH price), and the address received 56 million at genesis 10,000 ETH (about 213,000 ETH was transferred until this year).

But overall, Ethereum accounts created at genesis control only 2.66 million ETH today, or about 2% of the total ETH supply, down from 7 million ETH in 2018 (of course, some Holders may just transfer their ETH to a custodian/exchange or a new account).

While its lasting impact on supply distribution is often debated, it is undeniable that ETH crowdfunding is an ambitious project whose success reflects a new era around programmable blockchains to support smart contracts and decentralized applications enthusiasm. With The Merge just around the corner, many eyes are on Ethereum as it enters a pivotal phase in its less than ten-year history.

Also check out other resources covering ETH supply and its presale:

  • Galaxy Digital Research: Breakdown of Ethereum Supply Distribution Since Genesis
  • Takens’ Theorem: Visualizing the History of Ethereum

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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