Token distribution in perspective: Livepeer’s merkle mine not as successful as portrayed

Token generation & distribution has always been a top concern for anyone seeking to establish truly decentralized networks. We’ve seen many methods attempted, but it remains quite challenging to distribute tokens fairly to real users (not speculators) while avoiding concentration of wealth.

So as a token designer, I was very excited when Kyle Samani of Multicoin published A New Model for Token Distribution, praising the innovative work by Livepeer in developing merkle mining, a supposedly significantly superior model. It claimed to get tokens into the hands of real users while producing a significantly lower Gini coefficient. Analysis revealed these claims are inaccurate both for Livepeer specifically and for merkle mining generally. This article will deep dive on the effects of this method of distribution and propose some industry guidelines for future network launches. If you’re unfamiliar with merkle mining, I would recommend reading about how it actually works here.

Gini coefficient in perspective

Multicoin’s article opens up with the following graph, showing the at-times extraordinary wealth concentration among a few select coins.