Cypherpunk Monetary Policy— Crypto Distribution & Supply Charts

Alex Galea
Jan 10 · 17 min read

We look at projected distribution, emission and token supply curves for the top cryptocurrencies, including Bitcoin, Ethereum, Ripple, Stellar, EOS, Litecoin, Cardano, Monero, TRON, IOTA, Dash, Ethereum Classic, NEO, Dogecoin, Nano, and BitShares.

Distribution curve comparison (see link below for interactive version)

Interactive Chart:

https://tagto.org/dataviz/crypto-monetary-base/

The source code for these charts is available on GitHub here:

This post is a snapshot of the current outlook as of January 2019. For updated charts you can download and run the source code.


I became interested in currency inflation, and monetary policy in general, while reading Saifedean’s The Bitcoin Standard. It left me feeling very uncomfortable with central banks money printing policies. Just look at what the US Fed has been up to since the 2008 recession. This plot shows the total USD monetary base:

Wow that’s a lot of new money…

Bitcoin offers a hard money unlike the US dollar (or even gold) in the sense that it’s inflation rate is built into the protocol and unable to change. I wanted to see how this model compares to other cryptocurrencies.

While writing this, I learned that many have no definite inflation policy. In many cases the emission rates are controlled by the founders and/or organization, who will sell large portions of their coins to “fund development”. In these (and other) cases, we cannot say for certain what the emission curve will look like going forward, so I’ve plotted a dashed line to represent my best estimate.

Bitcoin (BTC)

In 2008, a person or group working under the pseudonym Satoshi Nakamoto created a hard and secure digital currency. The “hardness” comes about due to its deflationary properties, namely a cap of 21 million coins. Ever since the original version of the software and birth of the bitcoin blockchain, in 2009, Satoshi programmed in the following inflation logic:

4 years / 10 minutes ≈ 210 000 blocks
50 + 25 + 12.5 + 6.25 + … = 100 BTC
210 000 blocks * 100 BTC = 21 million BTC

In return for mining a block, the reward was initially 50 BTC, and this amount is set to decrease each 4 years until 21M exist. There’s various ideas about where 21M came from. It’s interesting to note that all the gold mined in human history would fit into a cube of side length 21 meters.

Satoshi clearly has an idealogical preference for hard money. This is exemplified by the string of text he included in the genesis block:

The Times 03/Jan/2009 Chancellor on brink of second bailout for banks

Using the above quoted inflation logic, we get the well-known bitcoin supply chart:

Ethereum (ETH)

Spawning in 2015, Ethereum seeks to build on Bitcoin’s already ambitious goal of secure digital cash by offering a decentralized virtual machine that can run and forever preserve results of Turing complete code execution.

This post is not concerned with the technical differences between the Bitcoin and Ethereum protocols (or any other), but instead with the difference in currency issuance and monetary policy. And indeed there is quite a difference.

Initially, ETH was pre-mined (created out of thin air) and sold for BTC at a rate of “1000–2000 ether per BTC”. This resulted in 60M ETH that was inflated by 12M in developer reserve funds. Then, similar to BTC, new ETH was set to be issued to miners at rate of 26% of the 60M pre-mined ETH, per year. From the Ethereum whitepaper (2018):

0.26x the total amount sold will be allocated to miners per year forever

Even though the issuance rate does not decrease over time, the amount given out as a fraction of total supply is constantly decreasing.

ETH issuance reduction before proof-of-stake

But the story is not this simple. In contrast to Bitcoin, the Ethereum monetary supply is quite free to change at the whim of the developers. For instance in Dec, 2016 EIP-186 proposed a decrease from the current “issuance level for ETH [of] 5 ETH per block”:

Block 3700000 — Block reward reduced to 4 ETH / block
Block 5000000 — Block reward reduced to 3 ETH / block
Block 7000000 — Block reward reduced to 2 ETH / block (minimum block reward until proof-of-stake)

And let’s not even talk about the difficulty bomb

Here we see how a small group of people was able to impact the Ether economy dramatically. The changes were justified in part as a “reassurance to investors that their holdings of ETH will be diluted to a much lower degree”. Rather than being assured, I find the mutability of Ethereum’s economic fundamentals unsettling.

ETH issuance after proof-of-stake

As it turns out, there’s going to be another big shake up to the ETH supply curve going forward, following the transition from PoW to PoS. As of now the best idea we have for the new issuance model is a tweet from Vitalik.

I think Vitalik is a visionary and I love his community involvement online. I also love the concept and active development of Ethereum, however the governance surrounding it’s economy seems very ad hoc from my perspective.

Assuming Casper (and PoS) is released in mid 2019, and the new inflation rate is 1.5%, we can compare the current monetary supply plan to the originally proposed plan from the whitepaper:

In the near future it’s pretty much linear:

In this and other cases, the dashed line indicates uncertainty in the expected emission schedule. In contrast, the solid lines indicate a hard inflation schedule (e.g. Bitcoin, original Ethereum whitepaper).

Taking the Bitcoin max supply date (~2140) as a reference point, we can compare the supply by percent:

Ripple (XRP)

Ripple has full control over the distribution of their XRP token. Here’s the deal:

  • The maximum circulating supply will be 100B XRP.
  • Currently about 40B XRP has been distributed (of which 20B was split between three founders — yes that’s right half of the distributed XRP is or was once owned by just a handful of people).
  • Ripple holds 7B XRP free to distribute.
  • Ripple holds 52B XRP in escrow, of which 1B is released each month to distribute.
XRP holdings as of January 2019

So far as I know, the distribution method is to sell XRP on the open market. We know that 1B XRP will be released per month, but there’s no promise of how fast or slow this will be distributed, but an official blog post suggested that 50% of each released escrow amount would be distributed, with the remaining 50% being pushed to the back of the cue. If this plays out, we can expect the following emission chart for the Ripple token:

Stellar (XLM)

Stellar launched in 2014/2015 and 100 billion XLM was created. As of January 2019, the mandate for it’s distribution is:

  • 50B XLM: to be given in small increments to as many people as possible.
  • 25B XLM: to be given to other businesses and non-profits to reach people that stellar.org wouldn’t otherwise be able to reach through the Direct Signup program.
  • 20B XLM: to be given to bitcoin and XRP holders (announcement about the details of this coming soon).
  • 5B XLM: retained by Stellar.org for operations.

The live distribution stats are quite transparent and can be seen here: https://dashboard.stellar.org/

As for the distribution schedule, I found this little gem on the FAQ page:

In the future, after we have given away all the lumens — which will happen over the next 10 years — everyone will need to procure lumens from third parties.

The other piece to Stellar’s distribution puzzle is a 1% annual inflation rate forever. This new XLM is regularly distributed to a small number of accounts (as voted on by XLM token holders). Since the selected accounts require a large amount of XLM-backed voting power, this inflation will likely have the effect of making the rich richer.

Putting this together we get the following supply distribution chart for Stellar lumens:

Relative to the Bitcoin max supply date (~2140)

EOS (EOS)

Of the 1 billion EOS token max supply, 90% are currently in circulation as of January 2019. Presumably, most of this circulating supply was sold to investors during the ICOs. The 100 million remaining tokens are locked up and being released to the founders at a rate of, get this, 0.32 per second! This is done by a smart contract, such that in 10 years all the tokens will have been released.

Assuming the fastest case distribution scenario, where newly released tokens are sold (distributed) immediately, we get the following distribution schedule for EOS:

Litecoin (LTC)

The Litecoin inflation schedule is very similar to Bitcoin, but with modified parameters:

  • 2.5 minute blocks
  • 84 million max supply
  • started in 2011

The 84M max supply is 4 times that of Bitcoin’s 21M, which balances out with the 4x quicker block mining rate. Since Litecoin started a few years later than Bitcoin, we’re only at 70% of max supply, compared to Bitcoin which is at 80%.

Cardano (ADA)

Cardano has very detailed and easily accessible information on its ADA currency distribution. They even have a page titled “Monetary Policy” which explains that:

  • ~26 billion ADA were sold to early investors
  • ~5 billion ADA (20% of the above number) was gifted and split between 3 separate entities in the Cardano community
  • ~14 billion ADA will be distributed in the future through “minting”

They also have this interactive plot showing how the initial 26 B ADA was distributed during 2015–2016:

Initial ADA distribution during 2015–2016. Representing about 60% of max ADA supply.

They have quoted a hard cap of 45B total ADA, which will be reached after the remaining 14B are issued through “minting”.

The “minting” process seems to be their term for PoS mining rewards, but I’m really not sure. To my knowledge they haven’t settled on the final details of how this will work. Although they have some rough formula for transaction fees, I can’t see how it ties into their plans for ADA supply inflation.

It’s my hope that the Cardano community will decide on strict currency inflation policy that will stand the test of time.

Monero (XMR)

Monero started in 2014, using a proof-of-work algorithm that allows for blockchain obfuscation and hence anonymous transactions.

The technical details are readily available and simple to digest. And it doesn’t take much digging to uncover some pretty detailed documentation on the supply curve [reddit post, spreadsheet].

Similar to Ethereum, Monero is planning a linear supply growth. Here’s the emission chart:

Relative to the Bitcoin max supply date (~2140)

Although long term distribution is linear, it was logarithmic up to this point:

TRON (TRX)

Tron’s supply was a tricky to figure out, and In fact I was only able to get a vague sense of their future plans for inflation and foundation reserve distribution. At least the current situation is clear:

  • 33 billion TRX held by foundation reserve
  • 66 billion TRX distributed
One part for Tron founders and two parts for everyone else. Fair split?

The best guess I found at future inflation comes from reddit:

Current rewards are being “mined” at an annualized rate of 504,576,000 TRX per year. This is being partially offset by fees that are being burned.

The burning they talk about means Tron reducing total TRX supply (i.e. throwing away private keys). I’m not sure what their expected burn rate is, I’ll just ignore that bit.

Let’s assume for simplicity sake that they sell their 33B foundation reserve over the nest 20 years. Given this plus the 500M new TRX from inflation per year, we can expect something like the following:

Relative to the Bitcoin max supply date (~2140)

IOTA (MIOTA)

Unlike any of the top cryptocurrencies I’ve shown above, IOTA has zero inflation and near-100% supply distribution. Simply put:

The total IOTA token supply was “minted” on the genesis transaction and will never change. It is now impossible for anyone to “mint” or “mine” new IOTA tokens.

Although earning money from the public ICO, the founders were required to participate in it themselves in order to acquire MIOTA tokens! And from their portion of purchased tokens, they actually donated 5% (of total supply) to the IOTA foundation — which can be distributed in the future to help fund research and development.

Their tangle cryptography looks promising, but from what I’ve heard the implementation of this technology still has a long way to go. That said, I’m hopeful for continued progress of the IOTA protocol.

Dash (DASH)

Dash is a privacy coin that’s been kicking around since 2014. It used to be known as Darkcoin, but since has rebranded.

Dash currently has around 8.5 million distributed coins — roughly half of the 18.9M max supply. Since Dash is a fork of Bitcoin, inflation works in a similar way. But instead of being given just to miners, Dash is distributed as follows:

This distribution is done as blocks are mined, which takes about 2.6 minutes. Furthermore, the inflation rate is adjusted more frequently to give a smoother emission rate. The exact details of this are a one-fourteenth reduction every 210240 blocks (~383.25 days).

I tried to extrapolate this logic back to the start of the blockchain in Jan 2014, but the inflation rate must have been different back then. The original block rewards were huge, starting at 500 DASH and dropping down to just 5 DASH in the first half year. During this time, ~4.5M DASH was created for miners and masternodes.

To get the calculation working I treated this 4.5M as a pre-mine and plotted the inflation curve (with the documented mining reward logic) starting from 6 months after the launch, with an initial reward of 5 DASH per block. Note this calculation is far from exact, but still qualitatively accurate.

NEM (XEM)

NEM brings to the table something they call “Proof of Importance”, in which they reward miners proportional to factors such as XEM holdings and number of recent transfers. The idea is to be more environmentally friendly (i.e. not PoS) and avoid the “rich get richer” paradigm (i.e. PoS). Unfortunately I don’t really see that working out, for instance exchanges typically hold the most tokens and make the most transfers.

Where the NEM mining reward scheme is unusually complicated (involving detailed graph calculations to determine node importance), the token supply is refreshingly simple. There were ~9 billion XEM created at the beginning and there’s no inflation. Mining rewards are paid in full from XEM transaction fees.

The only tricky thing to wrap your head around is the distribution. From what I could gather, about half of the tokens are likely being held and/or transferred around by investors, and the other half are sitting in NEM funds or other large accounts. For more info, check out this detailed reddit post or the rich list.

Ethereum Classic (ETC)

When Ethereum reversed the DOA hack in 2016, a group of developers took an idealogical stance against it — carrying on the original ETH chain with the hack intact. This chain then became ETC. Similar to Bitcoin, Ethereum Classic strives to resist change, treat “code as law” and truly make transactions immutable. Unfortunately for Ethereum Classic, much more development (and economic activity) is happening on the other Ethereum chain (“ETH”).

Funny enough, Ethereum Classic has made some pretty dramatic changes to the original Ethereum monetary policy. Thankfully though a “finalized” emission schedule has been integrated into the code base:

Unlike the current (and original) Ethereum emission rate schedule, the Ethereum Classic algorithm includes a hard cap of ~210 million coins. This won’t really make a difference though in our lifetimes, and for the meantime it tuns out that Ethereum Classic will likely be more inflationary than Ethereum.

NEO (NEO)

Starting life as AntShares back in Feb 2014, 100 million indivisible coins were pre-mined, with half being sold to investors and half held by the foundation. Since then it seems that 15M additional tokens have distributed to help fund development, and the foundation can distribute a maximum of 15M per year until all 100M are in circulation. Assuming this happens at a third that pace, we could expect something like this

Where most cryptocurrencies use their native token for network fees, NEO transactions require fees to be paid in GAS, a separate token which is being distributed to all NEO holders over the next couple decades. From the NEO whitepaper:

Each year around 2 million blocks will be generated and the initial generation will be 8 GAS per block. There will be an annual reduction of 1 GAS per block, per year, to coincide with the passing of every 2 million blocks. The reduction will continue down to just 1 GAS per block and will be held at that rate for around 22 years

Zcash (ZEC)

The Zcash supply will follow much the same path as Bitcoin:

  • 21 million max supply
  • Initial distribution of 50 ZEC per 10 mins
  • Distribution halved every 4 years

There are a couple big differences:

  • 10% of max monetary base (2.1M ZEC) is distributed to founders over the first 4 years
  • Slow-start inflation rate that ramps up block rewards from 0 ZEC/10 mins to 50 ZEC/10 mins over the first 20,000 blocks

I’m not a big fan of the founder distribution. As the CEO put it in 2016:

the founders are incentivized to support Zcash for the long haul (at least for four years), and they have limited ability to pump-and-dump.

I would prefer more structure to ensure this money is invested back into the project over a longer time frame.

The slow-release inflation rate is a cool approach, but keep in mind that it lasted only about 34 days and holds little bearing in the long run. The ZEC emission curve looks like this:

Dogecoin (DOGE)

This cryptocurrency is awesome because it managed to achieve a $1 billion market cap during the 2017/2018 bull run, despite being a parody coin named after an internet meme.

At first, time there was a max limit on the number of DOGE that could exist — but that got scrapped back in 2014. So now, similar to Ethereum, it’s forever inflationary. On the technical side it’s similar to Litecoin, using proof of work and featuring 1 minute blocks. Interestingly, block rewards are randomized (although this has no impact on long-term circulating supply).

Here’s the inflation schedule in plain text (below). Note that we’re on block ~2.5M currently, meaning we’ve long since passed into the 10k DOGE reward zone.

  • Block 1–100,000: 0–1,000,000 DOGE
  • Block 100,001–200,000: 0–500,000 DOGE
  • Block 200,001–300,000: 0–250,000 DOGE
  • Block 300,001–400,000: 0–125,000 DOGE
  • Block 400,001–500,000: 0–62,500 DOGE
  • Block 500,001–600,000: 0–31,250 DOGE
  • Block 600,001+: 10,000 DOGE

This yields the following Dogecoin emission curve:

Relative to the Bitcoin max supply date (~2140)

Nano (NANO)

Back when it was called Raiblocks, the full Nano supply was distributed using a captcha-based faucet. This is documented in some detail on their GitHub Wiki.

Nano is not inflationary, the full supply of ~133 million has been created. Looking at the rich list, I can see a small developer fund of ~4.5M, which I’ll take as currency that’s yet to be distributed.

BitShares (BTS)

BitShares offers a decentralized exchange where you can trade “bit” assets. For example bitUSD, bitCNY or bitGOLD. These are pegged to real-world asset prices, but backed by the platform’s native utility token BTS.

The distribution of BTS up to this point (and going forward) is tricky to figure out. When the genesis block was created in October 2015, ~2.4 billion BTS was distributed to holders of the previous BitShares token (version “0.9"). It seems these tokens were originally distributed in July 2014 via ICO.

Here’s where things get interesting. The max supply is set at~3.6B, which gives BitShares a bit over a billion BTS for it’s “working budget”. In the whitepaper, they set a rule to distribute no more than 1/2924 of the working budget per day:

daily budget = working budget / 2924

This allocation is used to pay mining fees, which are currently 1 BTS per 3 second block, and (optionally) support other projects.

Assuming this daily budget is fully utilized, the BitShares “max rate” emission curve looks like this:

Conclusion

I believe that cryptocurrencies offer a unique opportunity to engineer long term monetary policy that is carried out in full transparency. Unfortunately, many protocols we’ve looked at do not take advantage of this opportunity, or are prone to change (which defeats the purpose).

Other than fluid monetary policy, another noteworthy trend is the steeply front-weighted nature of most distribution plans. In other words, more opportunity for early adopters to acquire a larger percentage of the total supply (assuming a similar or greater amount of economic throughput going forward). The intensity of this varies depending on each protocol’s preference for hardness in their native currency.

I wonder how future generations will feel about this? Will they resent the early adopters for having an “unfair” advantage, or will they admire the hard money that comes along with low inflation. Only time will tell.


Thank you for reading. Please keep in mind that I have no intention to tarnish the reputation of any cryptocurrency or belittle the contributions of founders and project contributors. I am simply reporting the facts, with minimal commentary.

My goal with this post is to improve transparency of the planned monetary base for the top cryptocurrencies. This knowledge should give investors a better understanding of what they are buying.

Please note that my charts are far from exact, but I have put effort to making them qualitatively accurate. If you notice any glaring mistakes then please bring them to my attention. The source code is available on Github.

TagTO

Data Engineering and Beyond

Alex Galea

Written by

Senior Data Analyst, MSc. Physics

TagTO

TagTO

Data Engineering and Beyond

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