Market Analysis

Edgeware: Top 46 Entities Control 75% of Genesis Token Distribution

William · Blockchain Analytics and Research
1 week ago

Polkadot Network is the most hyped blockchain project at the moment, having sold 500,000 DOT tokens (5% of total supply) at a $1.2 billion market cap valuation. The project has drawn attention from top VCs and node operators - such as Polychain Capital and F2Pool - with some observers drawing parallels between Polkadot and EOS's China craze back in 2018.

Here we analyzed the initial token distribution of Edgeware, which is Polkadot's first smart contract layer. Edgeware promises to be a "self-governing, self-improving blockchain" powered by WebAssembly.

Despite much fanfare, Edgeware's mainnet launch has been postponed since 15th September due to glitches in its token distribution calculations reported by participants (including one reported by ViewBase). In the mean time, we aim to provide clarity with our independent audit of the token distribution using blockchain data.

Edgeware's Lockdrop

5 billion EDG tokens will be distributed at genesis block, with 10% allocated to the Edgeware team and 90% to participants. To obtain EDG, participants must take part in what is called a 'lockdrop'.

Participants can timelock their Ether tokens (ETH) for 3 months, 6 months, or 12 months to receive EDG tokens, after which they receive back their locked ETH. Participants are awarded proportionally more EDG tokens for longer timelocks.

Alternatively, participants can signal ETH balance in their wallets or smart contracts, but they will be awarded substantially fewer EDG and cannot validate on Edgeware’s network at genesis.

Objectives of Lockdrop

The Edgeware team has decided on this unusual distribution mechanism (as opposed to ICOs, IEOs, mining, or airdrop) in hopes of achieving these objectives:

  1. Tap into Ethereum community's long-term, committed participants who want to play an active role in Edgeware's governance. Participants who are long-term holders of ETH are awarded proportionally more Edgeware tokens for longer timelocks.
  2. Distribute tokens in a more fair manner than other token distribution mechanisms such as initial coin offerings and mining. A hard cap of 20% of total lockdrop tokens is also assigned to any individual participating ETH address or EDG address.

Effectiveness of Lockdrop

How effective is the lockdrop in achieving the objectives? We analyzed the blockchain transaction data of Edgeware's smart contract to find out more.

In terms of recruiting committed participants, Edgeware's lockdrop has successfully attracted major players such as:

  • Polychain Capital
  • F2Pool
  • 0x
  • Aragon
  • Iconomi
  • Raiden

Parity - the developer team behind Polkadot - has also participated in the lockdrop by signaling their massive WithdrawDAO smart contract, which has 116,142 ETH frozen in it because of a smart contract bug.

The decision to allow participation via signaling proved to be controversial, as it contradicts with the lockdrop's stated objectives of looking for "long-term, committed" ETH holders, since signaling participants can acquire EDG tokens without having to lock up ETH. Astute observers have pointed out that the decision to allow participation via signaling is a round-about method for Parity to clone the frozen ETH in their multi-sig wallet to Edgeware's new blockchain.

Binance was the only exchange that participated, by signaling their massive cold wallet: 0xBE0eB53F46cd790Cd13851d5EFf43D12404d33E8. Although Binance may not be the ideal participant that Edgeware is looking for (i.e. long-term ETH holders), its participation may be a positive sign for Edgeware in terms of potential exchange listings, lending, and other Binance offerings.

Chart 1: Percentage of Effective ETH contributed by top 55 wallets, where Effective ETH is computed by the formula: ETH_Locked_3mo + 1.3 x ETH_Locked_6mo + 2.2 x ETH_Locked_12mo + 0.2 x ETH_Signaled.

In terms of fairness in distribution of tokens, it is clear from the distribution chart (above) that there is a large concentration of tokens in the hands of few top participants. The top 55 wallets controls over 75% of the total EDG tokens allocated to participants.

Chart 2: Percentage of Effective ETH contributed by the top 46 wallet owners

In fact, the distribution may be more skewed than it appears. A few whales have bypassed the hard cap of 20% per wallet by using multiple wallets, as there are no rules preventing participants from splitting their ETH into multiple wallets. Using blockchain analytics, we have identified Ethereum wallets belonging to the same owner and they are labelled "Whale XX".

After aggregating the effective ETH balances by their owners, we end up with worse inequality in distribution. The top 46 entities controls over 75% of the total EDG tokens allocated to participants.

Binance Saves the Day

Fortunately, Binance's participation has averted a situation where whales have overwhelming control over the genesis balances of Edgeware. Binance is currently entitled to approximately 15.3% of the EDG token pool and they have announced plans to distribute EDG tokens received from the lockdrop to their users who had held ETH on Binance on 2019/08/31 11:59:57 PM (UTC).

Exchanges may serve as vital participants (in addition to VCs, node operators, and developers) in helping blockchain projects to achieve an equitable distribution of genesis holdings by participating in future lockdrops or other genesis distribution methods, since exchanges serve as fiat gateways and are responsible for a large fraction of activities on the blockchains.

Our Research

More information about our research on Edgeware participation statistics can be found below. If you like our research, please do not hesitate to approach us for any custom research requests at team@viewbase.com.

Edgeware: Flow Chart of Top 100 Participants
Edgeware: Participation Statistics


Recent Posts

True Ranking of Crypto Exchanges According to Blockchain Data
Weekly Report, April 21: ViewBase updates, Zilliqa, Aergo, Gifto, MDA
Comments