(This is an unofficial personal statement about the recent IOP Blockchain upgrade and general project status. IOP is a decentralized project, and I don’t speak for everyone.)
At just shortly after 13:38 UTC on Saturday Apr 13th, the IOP block reward halved: from 50 IOPs per block to 25.
The IOP blockchain is based on Bitcoin (although it’s not a fork), and IOP halving works in exactly the same way as Bitcoin halving (https://www.bitcoinclock.com/), although it doesn’t happen at the same frequency.
This is an important milestone for our project and the IOP economy. We celebrated with a halving party in the office with plenty of IOP beer!
But blockchains don’t stop for parties. The IOP blockchain has been running faultlessly now for more than 150,000 blocks, and this was just one more step on the way to the max supply of 21 million IOPs.
But the halving wasn’t all that happened on Saturday. If you look at the block before the halving, block 149,999, you’ll see something unusual: a block reward not of 50 IOPs, or 25, but of more than 6 million IOPs. This is a one-off development fund expansion of just over 6 million IOPs, which was announced to the community just shortly after the release of our new white paper and has sparked a lot of discussion.
In this post I’ll be talking more about this one-off increase, including how it will be used, why it was necessary and why it’s great news, both for IOP as a project and for new and existing IOP holders. In particular, I’ll be looking at the odd ways in which crypto investment and traditional fiat investment don’t mesh, and address some community concerns about the short-term effects on the IOP price.
First, some technical details. The block reward increase isn’t actually 6 million IOP, it’s 6370322.27077051 IOP. This incredibly specific number is to resolve a few issues from the very start of the chain, before IOP was a community project, when the block reward was set to 1 IOP and funding and investment were handled centrally. It ensures that IOP is finally on track to hit our promised maximum supply of 21 million IOP, and the part after the decimal point means we finally have a round number of IOPs in the supply again. This makes the developers very happy. 🙂
But that’s just background technicalities. We’ve restocked our development fund. We’re not planning to sell those tokens on the market. So what are we going to do with them?
New Investment Opportunities
IOP is a complex project with multiple large-scale sub-projects. Community members will already be familiar with these: we have Mercury, Morpheus, Titania, Hydra, and many more.
These aren’t just milestones to be ticked off in a roadmap. They’re tight-knit components of a complete technology stack, with many dependencies and interrelated parts. We have to develop many parts simultaneously, with an eye on what overall progress across all the projects can produce a minimum viable product that we can put out into the world. This is, as you can imagine, complicated, time-consuming, and expensive.
Any one of our individual projects would be its own product out in the wider crypto world. But we’re not interested in being flashy and raising money at the expense of the community or token economy (it’s with good reason we’ve had plenty of airdrops, but we’ve never had an ICO or any of those other rebranded but equally useless acronyms that plague crypto), and IOP has always been about providing a complete set of tools which people can use to communicate and transact however they want.
Until now, project development has weighed heavily on the shoulders of a few angel investors who were able to see the potential of IOP from the very beginning. But this is too risky, for them and for us. So during the last 6 months, we’ve carefully paved the way for IOP to be fully independent, able to weather the storms and above all to grow, scale, innovate and deliver on the promise we set out in our whitepaper: https://iop.global/whitepaper/
We now have a much clearer product which is sparking interest in a lot of different fields. We’re currently talking to multiple universities who are interested in using IOP across their campuses to help manage the numerous problems they face surrounding identity, content management and credentials in the increasingly digital world of education. In exchange, they’ll be running nodes, providing development assistance, and just generally providing what every blockchain needs: users who will actually be transacting in the token.
And this is just one of many directions IOP is heading in. We’ve been attracting investment interest for a while now, and we’re eager to accept. The problem is this isn’t as simple as it sounds.
Just Take My Money!
For a while, it seemed like the best and most decentralized way to encourage investment was to rely on market mechanisms: investors who believed in IOP would buy tokens on the market, and this would drive the price up, increasing the value of the tokens mined using the development licenses.
But sadly there are two problems with this: it doesn’t work, and even if it did no-one wants to do it.
It doesn’t work because crypto markets are too immature. IOP is part of a much wider market that’s dominated at all times by Bitcoin. Even if an investor put a significant (to us) amount of money into IOP, it would be a drop in the turbulent crypto ocean that sees prices rise and fall on a whim. It’s just not reliable as a funding mechanism.
More importantly, no-one wants to invest that way. (I should be clear that I’m talking only about very large investments here. One of the beauties of crypto is that it allows smaller investors to invest in a project by buying tokens direct from the market. Many of you will have done just that. But that’s very different from the kind of one-off investment that can fund most or all of an entire project, and one of our mistakes was not to recognize this sooner.)
Investors, even crypto investors, are old-fashioned. They want to invest directly in a project, not just park their money alongside it. They want to talk to the people involved, see what’s being made, sign direct contracts, and (naturally) get a good deal reflecting the size of their investment.
Even if they’re on board with the idea of tokenization, they want to buy their tokens direct from the project. And, indeed, we’ve had a lot of significant offers recently to do just that. The problem is, we’ve never had the kind of token quantities you’d need for this kind of deal. That might seem surprising, but IOP is a decentralized community project! All the tokens are out in the market and the community. The tokens we mine mostly go straight to developers.
But at the same time, we can’t offer investors anything other than tokens: it wouldn’t make sense for a crypto project with its own token to offer equity or anything similar!
So this development fund, odd as it might sound, is mostly about giving us a way to accept money from the people who want to invest in us.
Some people have expressed concern that this move will harm the IOP price in the short term, even though the long-term benefits are clear.
And it’s easy to see why you might think that: considered in terms of simple supply and demand, a sudden large increase in the supply of tokens should make the existing tokens proportionally less valuable. But I think that’s wrong, for a number of reasons.
Now, I can’t predict the markets, and my opinion may run contrary to that of tokenomic experts, but I also have some experience and as one of the project leaders I’m willing to take responsibility for what comes next.
Here’s why I think the price won’t suffer in the short term, and could even rise:
First, the six million tokens aren’t going to be on the market.
Some will be sold to cover ongoing expenses (wages, rent, etc.), but this should be negligible. IOP Ventures will soon publish an economic paper and transparency report covering the details of this.
Mostly, as I explained above, these tokens will be used to satisfy investor demand. This will give us a supply of fiat money, which of course how most of our expenses need to be paid, greatly reducing the pressure on our token fund.
At the same time, the number of tokens being liquidated on the market is set to decrease:
The block reward is halving, so that actually means far fewer tokens going straight to the markets. And the new classes of token holders will be seeing in the next few months will have no reason to sell:
- Investors aren’t going to buy large numbers of tokens from us just to sell them. It would be pointless. (And if they receive a favourable price from us they will be contractually obliged to hold them, so there is no arbitrage opportunity.)
- Universities and our other partners are entering into long-term knowledge exchanges with IOP. They will be granted mining licenses, but the mined tokens are for using, not selling. This is harder for us to control, but it would be extremely counterproductive to break this agreement, having spent so much time and effort integrating IOP technology into their institutions.
At the same time, this massively increased use of IOP should work to increase the price, because we will finally be demonstrating the actual value of IOP, rather than just its potential. That is, in the end, what cryptocurrencies are supposed to be for, and what so few have managed to achieve.
The Decentralized Future is Almost Here
Block 150,000 wasn’t just an arbitrary milestone. We’re on the cusp of major developments for IOP. After this reward halving, our source code will soon be published openly on GitHub under a free GPL licence, supervised and protected by the Decentralized Society Foundation and managed by IOP Ventures.
Once we publish our Morpheus prototypes, mining will be opened up to our partner universities. Once IOP mining is decentralized, we will switch our development focus and work full speed on the implementation of Hydra-Algorand, our great new consensus mechanism. This is the last step on our journey towards a fully open and decentralized system, which has always been our promise to the community.
But that’s just the start of a new journey. IOPs new blockchain will be born into a fully working and feature-rich ecosystem. An established day-zero community using early versions of our Mercury, Prometheus and Morpheus technologies, running Titania Nodes or IOP boxes and communicating and transacting privately and securely, all from within the same technology stack.
I don’t see any other projects in the crypto space that can compete with this.
That’s still a little way off, but this development fund will give us the push we need to clear this final hurdle. Until then, IOP will probably remain and underdog in this industry of flash and hype. I don’t think the price will drop, but at the same time I honestly think IOP will remain undervalued. But the good news is there’s an unbelievable opportunity for those who do see the value.
It’s been a long road of 150,000 steps and counting, but IOP is stronger than ever, and our journey towards a full crypto stack is now entering an exciting new stage. Thank you to those who have travelled with us so far, and for everyone else it’s not too late to join us!