How should one distribute a $1 trillion dollar treasure?
A man discovers an asteroid containing $1 trillion dollars worth of gold, he spends a year and hundreds of millions of dollars to convert this raw gold into gold coins. He wishes to use this gold to bootstrap a new gold coin currency, but is faced with the challenge of distributing these gold coins to the masses. As a rational actor, this man also wants to maximize his own profits so that he can reinvest in things that create more global demand for gold. Any profits he leaves on the table will accrue to someone else as the free market and voluntary exchange work their magic. It is unknown if these other people will be as effective at reinvesting the profits to drive gold demand.
Dividing up the Profits
There are several different types of people who could profit from this man’s effort:
- Those who found the asteroid, mined and then minted the coins
- Those who did nothing but watch
- Those who buy coins and then sell them for more
Assuming those who mined and minted the coins sell at market established prices, those who buy and sell for more have earned their profit by taking on risk. If those who mined and minted the coins sell below the market price then those who buy below market price and sell at market price take no risk and therefore earn profits for doing nothing. By selling below market prices profits go to those who were fastest to claim the limited supply and free profits for doing nothing (but being fast).
Distribution Strategies
The man realizes he needs a plan to maximize his profits or someone else will, so he considers his options.
1. Keep It
Under this option the man can sell his gold coins a little at a time, but because he has cornered the market in gold no one wants to adopt it as a currency. As a result he is only able to realize a small portion of his gold’s value and a gold coin standard is never adopted. In addition he has no capital to invest in businesses that drive gold demand.
2. Give it all away
Under this option the man gives the coins away to everyone, but no one has any incentive to see the gold coins adopted as a currency, so almost everyone sells the coins to buy a single meal. A savvy banker buys up the gold coins at cheap prices and then sets about a plan to turn them into a new currency.
If he gave it away to a single individual then the problem simply moves from the original man to the new owner. If he wants to give it away to everyone, then he must implement a system to prevent the same person from requesting multiple coins.
In any event giving the coins away does not generate capital to invest in businesses that drive demand for gold coins.
3. Sell it for a fixed price
The man could decide to sell it all, but he doesn’t know what price to set. If he sets the price too high then no one buys it or it sells very slowly. If he sets the price too low then a savvy banker will buy it all up at once before anyone else can discover the opportunity. Either way, the man fails to achieve his objective and the new buyer gets to come up with a better distribution model and key the profits.
4. Auction It All
Under this model the man sets up an auction to sell it all, but no one has enough money to buy it all so the highest bidder ends up being the wealthiest individual who gets it all. This individual is then in the position to make a profit by monopolizing the market.
5. Multiple Item Auction
Under this model bids are accepted from all and the highest bids are filled first until there are no more coins left. Everyone pays the price of the lowest bidder. Each person has to choose between bidding for more coins at a lower price or for fewer coins at a higher price. If they bid too low they may get nothing, but if they bid too high they may get less than they desire.
This particular option has the benefit that the buyers have control over the price, everyone gets the same price, and that price is the lowest price that is still high enough to qualify. Unfortunately, it means that some buyers don’t get anything and that the seller is leaving money on the table for every buyer willing to pay more than the lowest bid.
This approach also dumps it all on the market in a short period of time. There is much less capital available over a short window of time than over longer windows of time. To maximize the profits this type of auction could be repeated daily over a year or more.
6. Give Share proportional to Money Paid
Under this model everyone who would like gold coins puts money into a pool. Everyone gets a number of coins proportional to the money they put in. Everyone gets the same price; however, no one knows what the price is until all the money is received. This forces everyone to estimate how much money everyone else will put in. If you think everyone else will put in too much money, then don’t put your money in. If you think everyone else will not put in enough you put in money. You can choose whether you want to reveal your estimate by putting money in early, or you can wait and put it in a the last second. Either way the total is unknown to everyone until the last second.
This model also forces those with the most money to put their money in first or else they will be forced to bid the price up or not participate if the price would go above market value. Those with less money can play the margins by deciding if they want to buy small amounts at higher prices than the large holders were willing to pay.
This approach also suffers if it is done over a short window of time, so for maximum effect the man divides his coins into 365 lots and sells them over a year.
7. Commit to selling on Open Market over Time
Under this model the man informs the world that every minute for the next year he will sell a coin until all coins are gone. He will sell this coin to the highest bidder in a traditional exchange order book.
This model works like the multiple item auction except it spreads it out over time rather than selling it all at once. It also ensures that the man gets the highest prices from the order book rather than the lowest. In this way the man sells his gold to the highest bidder and dollar cost averages his sale to maximize his returns and minimize his risk.
Implementation
The man considers his options and decides that it would be best if he distributed the coins in a fair and transparent manner using a smart contract on a public blockchain. This way everyone can trust the distribution process and he can maximize the value of his coins by reducing risk.
He evaluates the market and concludes there is only a single smart contract platform that has sufficient liquidity and financial connections to sell his coins. He hires an expert on this platform and asks him to implement option 7, selling one token every minute to an open order book. The expert informs him that the smart contract platform is not capable of implementing this algorithm because the cost of “gas” would be unpredictable and there is no easy, cost effective, way to maintain a sorted order book.
Saddened by this reality, the man considers option 6. While slightly less than ideal, it will generate market pricing and 3rd parties can take the risk of buying from the smart contract and reselling on centralized exchanges. In this case those who perform arbitrage are providing value that the smart contract platform could not perform. In exchange they earn a small commission based upon the arbitrage opportunity.
Conclusion
The man with the asteroid has an asset whose efficacy is maximized only when it is well distributed. As a rational actor he should attempt to maximize his own wealth by ensuring his coins adopt monetary value in addition to their gold value. This means he will need a strategy to ensure the market trusts the distribution process and that he profits from it. He also needs a strategy that ensures no one gets something they didn’t earn...
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Some of the commenters don't realize that the post is about the token distribuition of EOS. Am I correct?
Yes, not only is it about EOS, but it's about the shortcomings of ETH. It's too bad EOS cannot ICO itself on EOS. That would be a neat trick. But imagine how great it'll be when other apps on EOS will be able to use Option 7 after EOS is all up and running!!
EOS could ICO itself if Protoshares were used again. I'm sure there are some people who were with Invictus from day one who are still holding on to Protoshares. Protoshares have been upgraded to DPOS (no mining needed), so why couldn't we use that for EOS ICO? It would also honor the commitment made to early supporters of Invictus.
Nice post! What will happening, if someone resteem your post?
No volume.
"No volume" is perfect for ICO. ICO will create volume.
With no transaction fees on EOS that will be huge.
Mind Blown !
Please what is #EOS
This is EOS Technical White Paper
Enjoy,
Merry x-mas
:)
We get it
Pretty much all of the air dropped coins are worth nothing at this point(giving it all away). I like the way Bitcoin was done, Satoshi only has 1mil out of 21mil. I think that is pretty fair overall.
Praise KEK. I posted here because that's how we roll now. I think this is a great way to ask a question with the same logic so it will yield the same process and eventual, possible, perfect answer. So a guy lands on say how much gold, a trillion USD? Ok. Ok so the rough global estimate is that the world now contains roughly $7.3 trillion USD in Gold now so $1T would mean he had about 13.7% of all the Gold in the world. This would mean that supply and demand would drive prices down, if released all at once. People who had the money would buy more of it if it was a lower price. Gold is gone. What if the supply at $7.3T is inadequate for demand however? Than the price could go up as people tried to buy the remaining Gold but this could not be possible. That is because right now you can buy Gold at ~$1,250/oz. Someone would have to put in a Buy to get it and then they get it so it's just a matter of how much of one form of money into another they want to get. Gold prices are already set but roughly to supply and demand. Since we don't have a gold standard now than we don't really need one. Increasing the supply would not create a need to change international standards. The question I guess is what to do if you are the man. The man is only one man. Gold is very valuable, because of supply and demand. He should logically sell the gold for as much as he can without disturbing the supply and demand for the metal unless it results in higher demand. How do you increase demand? For a commodity and precious metal it is increasing its value over other stores of value. At 13.7% he would not affect supply a lot and demand would be roughly the same. So if I were him I would open a jewelry business and use the gold to start the company, pay his workers in gold and get paid in USD. Buy land and assets and continue to sell gold. Sell it in medium amounts and small amounts. Never sell more than 50% of it however. I think a perfect curve is a split between assets (land/homes/patents/IT/cars/etc.), liquid assets (USD$, BTC, STEEM, $ with the banksters) and harder assets like (precious metals like Silver and...wait for it...Gold, bonds and stocks in a 1:3. I would not attempt to disrupt the price whatsoever. It is already high and a trillion bucks is a trillion bucks so long as you can turn a trillion dollars worth of something into a trillion dollars in your hand. But that never happens. He would not live long enough.
Imagine you owned all the sand in the oceans. You want to diversify. At what price do you sell it?
By the way, Satoshi will never sell or even move a fraction of one Bitcoin. If he does, every criminal in the world will instantly know who he is. That's not like winning the lottery where they protect your identity.
EOS, gold they are all based on the same thing "perceived value". Gold doesn't have value because it is life saving or important. It only has value because we as human have gave it value. Just like Diamonds, at one time it was nothing more than worthless carbon. Then DeBeers stepped in, Look at it now. Besides crypto, it was one of the best investments one could make in our life times. Will these tokens be seen as having a trillion dollars in value, I guess that is up to us to decide. Golds value is intrinsic where as EOS's value is imaginary and non tangible.
hold the phone a sec here, with really good marketing, now it's all about "Chocolate Diamonds"! lol
lol, chocolate diamonds is something I too got a huge laugh at when I saw 'em.
I wish I would have bought my wife a 3 carat chocolate diamond back when they were called piece of s*it diamonds with more pieces of carbon inside than my damn muffler.
imaginary and non tangible? heres a good metaphor if a hammer is worth 5$ and a wrench is worth 5$ are the hammer and the wrench worth exactly the same? No because one is a tool you need to pound nails and the other is a tool you need to loosen or tighten bolts. Even though they are worth the same amount of money their value depends on what kind of work needs to be done. And right now speeding up, as well as standardizing dApp DEV is what is up.
Fifty years from now a hammer and a wrench will still serve the same function, where as crypto currency will not. Eventually as we evolve, our economies will become activity based -where you will get a certain amount of goods for the services you can provide. Eventually the whole idea of 'Money" will be taken out of the formula altogether. The idea of storing wealth in a digital or paper form is an archaic methodology and eventually these things will go the way of the dodo bird. FFS I cant even buy crypto currency in Canada without getting harassment from police and threats from my bank that they are going to shut my bank account down. Standardization is just a fancy word, if crypto creators haven't got the fundamentals hashed-out yet.
I agree with everything u just said here except the first sentence. Sorry the mounties are being dicks I live 45 minutes from Vancouver BC and ... well that sucks.
fifty years from now, the context of life may actually change so much that those two tools are completely irrelevant ... just like steem its completely possible that any of these old archaic tools like virgin cryptocurrencies, hammers, wrenches will be frankly, completely obsolete in 50 years
The world will be operated by one thing and one thing alone AICoin
Canada is super easy to buy crypto - just go to one of the many atm's.
If you want to get really radical, research the idea of eradicating "interest" altogether.
"harassment from police and threats from my bank that they are going to shut my bank account down". So sorry about your trouble. Sounds like they kind of 'own' you already. Not sure how you get to the idea that storing wealth digitally is 'archaic'? It sound more futuristic to most people, just like email was in 1990.
EOS value comes from its technology and real world use = value.. so its like Gold but actually does somthing..
Hahaha..
We belong to the same world. .🤣😂
What is EOS?
no! it is about the asteroid...
lol!
The government could also show up, declare the man a polluter of outer space and fine the man for not having filled out the necessary paperwork and lacking the necessary licenses, and then confiscate and redistribute the wealth in exchange for votes...
If the government shows up then you are entitled to a hearing and can put forth evidence that their initial search was made without a warrant, which is unreasonable on its face, and then obtain an injunction against them. This would leave you free to do any of the options listed above or, like me, just go out and SPEND IT!
What if the Gold could not be obfuscated, transported and otherwise untouchable by government actors outside the system so long as they do not have the super secret password?
Do you feel like this would change the dynamics?
Spot on line of questioning here.
And for the record, I very much enjoyed your structuring of questioning and answering in this post as a sort of bread crumb trail into seeing the genius that is EOS.
Well Done. I thoroughly enjoyed the way you articulated the concepts...and I thank you for supporting me in expanding my understanding in the processes at hand.
Respect and Much Appreciation.
Steem On,
The Dream is Indeed LIve
:)
No. I would still look for their authority to act against me, personally in the specific manner that they are. If the constitution isn't followed then I see a way in the process to stop it and hold the agents responsible and liable for their transgressions.
why get into all the legal theatrics when they can simply be peacefully avoided? The very nature and design of the legal system is Obfuscation. By deliberately engaging in that way, you are vulnerable to unforseen consequence. Can't fight the system really. I mean you can....but it's like going about it all wrong....not a very effective or efficient way of operating.
Just Saying...
Money and currency are purely legal theatrics in themselves. They don't arise out of any other realm. Finding a way to use "the system" to your advantage is not fighting anything. It is actually an act of support for it. And by supporting it doesn't mean you want all the bad shit it contains and has been corrupted to. It means you know how it was designed and that it was designed for your benefit and you are just trying to obtain what you are entitled to by your creator. If you don't stand up for what you believe is yours, you will feel all those unforeseen consequences you fear.
well said
Hello, please read my POST please.
That's why you take that asteroid right down into the bottom of the ocean and break off enough for an oil rig that covers that hunk of space metal. Or you land it and declare it a sovereign nation and have roughly the GDP of Goldistan. Or turn it over to the Aliens so they can use it to strip the gold into lead in micronuclear reactions that will power you to the past or future where you could bet on every World Series game since idk. What I would do is take a huge amount, mint them into coinage and pay mercenaries to assemble an Army and then take over the world. Crush every government and impose peace on earth. And we would eat gold flakes cake for dessert. Make a bunch of golden bullets and cases too and a fair amount of gold 300 Blackout M4's and AR-10's.
I assume that, for the purposes of this analogy, there is no gold in the economy already and nobody recognizes it as valuable based on past utility... all recognized value would be speculative, based on predictions of future utility?
I also note that in scenario 4, the buyer doesn't corner the market, he merely puts himself in the shoes of the seller: he's got tons of worthless coins that he has to figure out how to make valuable.
What you do is stamp the gold into coins with pictures of all the Presidents, so people want to start collecting them. The thing is, you make sure there are more coins of some presidents than others. That way you create a shortage for some collectors.
Seems to be a common problem right now in the ICO market. Very nice piece. A lot of time, thought and work put into this scenario/symbolic story
enjoy !
@officialfuzzy .....some newbie looking for fast cheap money cloning ur story ;) just wanna let you know. .no link no mention notin . . . . https://steemit.com/blog/@shanzaylizay/by-what-means-would-it-be-advisable-for-one-to-disperse-a-usd1-trillion-dollar-treasure
Many are financially illiterate in the banking system and this is recognized by the governments of many countries.
Hey Fuzzy, very nice question indeed.
Firstly, let's calculate the percentage this asteroid represents in Gold on Earth.
1 Kg of gold is worth $40712.49 at today's valuation.
1 trillion / $40712.49 = 24 562 486 kg of gold
This asteroid would introduce 24 562 486 Kg of Gold which is basically 24562.486 Tonnes.
There is rougly 170,000 tonnes of Gold on Earth.
(170 000 / 24562.486) * 100 = 6%
This asteroid would increase the supply by 6%.
Selling everything at once would dramastically increase the supply of gold and therefore dramastically reduce the price of this asteroid in gold. As we all know, scarcity is what drives value. In 2015, The supply of USD increased by 4% in 2014 in one year.
You all known the law of supply and demand : Distributing this gold to everyone would at the same time reduce the demand for Gold but also increase the supply also killing the Gold price.
In either cases, selling it as gold is going to dramastically dump the gold price .. so what not try to sell it as something else? Something that only this asteroid has?
Selling it as Asteroid Gold
It's 14%, not 6%.
exactly correct @linouxis9, and the economy would probably collapse as well, especially if large reserves of gold are still held by banks as reserves or other critically established "too big too fail" entities.
what if a new use case for gold drives demand for more of it? what if gold is found to have unique properties that enable massive amounts of data to be spread between holders based on the amount of gold that individual/group/organization/institution has?
and what if the demand for this data was set to increase by orders of magnitude over the years?
@officialfuzzy @alexpmorris This is literally why i have a head ache and I have been catching up on steemit for weeeeeeeeeeeeks this is what i think about ... owie bedtime soon
BTW, getting back on track with EOS, and regarding this point:
It would be nice to be able to set a limit price with each bid, and it does seem possible to add a sort() function in solidity, as I described in a comment on @biophil's post.
Link: The first 5 days of the EOS token sale will be unfair. Here's how to fix it.
This example by Vitalik Buterin is from 2014, but he does show an implementation of a generic quicksort algorithm that can sort object pairs. Now, I'm not sure of the "gas constraints" involved, but with a sorted object pair it should be relatively straightforward to sort by "limit price", "database ID".
Link: Advanced Contract Programming Example: SchellingCoin
Link: GitHub SchellingCoin implementation from Ethereum Repo
I admit I'm not well-versed in EC20 contracts or serpent/solidity, but technically, shouldn't we also be able to see all the current bidders and make an outside calculation of what the expected price would be before the window closes? If so, even better if someone could "cancel their order" before the window closes if they are displeased with the expected closing price.
but now you're changing the scope of the question. so, perhaps here's a better way to answer...
I just discovered a super-computer on an asteroid with the capability of performing 1 TRILLION Gigahashes/second. How might that effect the current crypto ecosystem? Should I dump the processing power on "the market" all at once, or should I try slowly trickling it out at a rate that the current market can adjust to and absorb in a more controlled and balanced fashion?
Of course, the even bigger issue with that much "power" might be... 51% ain't even an issue no more!
I disagree. This gold analogy hits at the underlying situation pretty well. Though if you look in here you will see that i am certainly making some analogies in this direction. Because the properties of gold are different than those of data transmission although both are highly valuable.
This is why i use the analogy that gold has a special property we didnt know about until now and that holding gold enables you to transfer data between yourself and others.
You could announce a "hard fork" of gold where everyone who owns some gold would get some more free of charge. That way there would be a rush to buy gold to get the free stuff, allowing you to offload your excess supply at inflated prices.
How are we going to be notified when dis coin is out , think is a good coin for long term investement
interesting perspective. very good post.