ATD v1 didn’t go as expected

The MESG Foundation’s Algorithmic Token Distribution (ATD) was introduced as an alternative to ICOs. It aimed to release tokens according to volume in an effort to allow the token price to grow alongside the project. Read more about this on the blog.

The plan of releasing tokens algorithmically according to the traded volume worked well for a while, but then things started to go off the rails.

What was not foreseen

The initial ATD method of releasing tokens according to volume went according to plan until October 30th, 2019, when an unexpectedly-large amount of trading volume kicked in. It was likely caused by trading bots, which often provide necessary liquidity on exchanges, but also can be used for boosting volume metrics.

The sudden increase in volume resulted in a flood of unlocked tokens entering the market. However, this increase in volume was not related to an increase in activity or interest in the project, as determined by the number of visits on the website, liquidity on each market cross and the token transaction volume on the Ethereum network.

Note the increase of volume and the token release spikes after the 28th of October. Source: distribution chart from the ATD website.

When we noticed this spike in volume, we reduced ATD ratios accordingly to prevent an excessive number of unneeded tokens from being unlocked and accumulated on our side, as the noted volume wasn’t related to demand. However, it soon became difficult to predict the volume and propose accurate token release numbers. Moreover, changing the ATD ratios often defeats the stability and transparency of the system.

Note the decrease of the repartition from 6% to almost 0%. Source: repartition chart from the ATD website

At this point, we had released too many tokens into circulation. It became clear that volume as a release metric is unsustainable because it can be faked, irregular and doesn’t represent actual project growth nor real market demand for the token.

Addresses #3, #5, #6, #7 and #9 showing recent unlocked token quantities controlled by the MESG Foundation. Source: Etherscan MESG Token page

Our initial goal was to create an ideal distribution method by tying released tokens to demand, not for us to accumulate as many tokens as possible. Alas, our first version of the ATD proved to be unfit for today’s world of bots and untrustable volume.

To remedy the issue, we considered options like aggregating multiple metrics, but this proved to be risky and would have likely faced similar issues to the volume-based ATD, as other metrics could also be faked. Without solid, unalterable metrics to base token release quantities on, the choice to revert back to simplicity became clear.

Introducing ATD version 2

The goal of the ATD is to finance the development of the project progressively to increase stability and transparency for both the MESG Foundation and the token holders by distributing the token in daily allotments. The new ATD will implement this concept in the simplest way possible, along with justification to provide transparency to the token holders.

The main goal of the MESG Foundation is to develop the project and its ecosystem to become a standard across the industry. To reach this goal, the foundation needs to cover many expenses, including, but not limited to team salaries, development bounties, marketing, hackathons, conferences, computational resources, online services, licenses, and exchange listing fees. That’s why we decide to link the ATD directly to the growth of the foundation’s needs instead of the token market growth.

The ATD v2 will consist of releasing a fixed number of tokens daily, at a daily rate that’s published in advance, justified by the financial needs of the MESG Foundation and the utilization of the token.

At the beginning of each monthly period, the Foundation will publish an article on the blog announcing the daily number of tokens to unlock throughout the Foundation’s locked wallets for the forthcoming period, along with a financial summary to justify the rates based on the previous period’s use of the token.

We also invite any token holder to provide feedback on the forum as often as possible in a category dedicated to the continual improvement of the ATD system.

From time to time, the Foundation may re-lock tokens that have not been used at the beginning of every period, along with justification, to prevent accumulation and adjust the number of unused token of the previous period.

Implemented as early as January 2020

Version 2 of the ATD will be implemented as early as January 2020. Along with the first implementation of the ATD v2, we will include a summary over the use of the token, not only over the last month, but since February 2019, the date of the first listing of the token. The number of unused tokens to be re-locked will also be calculated for this long timeframe.

We think finance transparency is extremely important for a project that aims to be funded using a token. The goal of this change goes back to the original goal of the ATD: to make a more sustainable, transparent and logical release method to benefit the long term token holders and grow the project sustainably.