Opinion about 'the freeze' — adding vesting to unclaimed mining rewards
There's a lot of discussion going on in the TON community about the proposal for "Tokenomics Optimization". The proposal is to freeze inactive genesis mining wallets for 48 months. To be more specific, 194 wallets holding 1,081,425,847 Toncoin. The list of addresses is available here: https://tontech.io/stats/early-miners
Like many members of the community, I formed my own opinion on the matter. I even changed my mind a couple of times when I understood a few things that weren't initially clear. To help educate the community on the subject, I decided to put my personal opinion in writing. We may even have a community vote on this proposal, which makes educated decision-making even more important.
If you don't know me, I've been an active contributor to the TON ecosystem for a while now. I'm the co-founder of Orbs and I submit pieces to this blog from time to time. I speak about TON in conferences and do (uncompensated) ambassadorial work for our ecosystem. I believe that TON is a game changer and I love our community. It's important to note that I'm not part of the TON Foundation and, in any case, the opinions written here are my own.
Freezing accounts - wtf?
This was my knee-jerk reaction to this proposal when I first saw it. The TON community has some members that come from web2 backgrounds and members that come from web3. If you know me, you already know that I come from web3 and deeply believe in decentralization. I'm the author of the DeFi belief system and known to be a maximalist in my views.
Now, for a decentralization maximalist to hear about freezing accounts - indeed wtf? A fundamental principle of web3 is true ownership. What gives us the right to freeze anyone's tokens?
The source of not wanting to freeze others' tokens stems from the fear that one day in the future, somebody may want to freeze my own. My tokens belong to me and no community vote should be able to touch them.
It took a closer reading to understand that this proposal does not violate this principle. The proposal discusses the genesis mining program of TON. As you know, as part of the genesis, TON coins were distributed by a 2 year PoW mining program that ended in June 2022. The proposal brings to discussion some parameters of this mining program and its tokenomics. The tokens up for a freeze are only tokens that were mined directly from the genesis PoW Giver contracts and were not fully claimed until today. Nobody in TON will ever dream of freezing a regular token in somebody's wallet.
The market cap of TON
Market cap is probably the most important metric in any token-based ecosystem. This is the primary metric by which the industry ranks projects. Entire websites are dedicated for this metric like https://coinmarketcap.com. It is well known that Bitcoin is currently number 1 and Ethereum is number 2. Number 1 in what exactly? In market cap.
It turns out that projects throughout the years often attempt to manipulate and inflate their market cap artificially in order to climb up in the rankings. Everybody wants to be a top 10 coin. One of the ways to do this is to mint a large amount of tokens that aren't actually traded (they can be locked somewhere). Since they're not actually traded, minting them will not create sell pressure and bring the token price down. But when calculating market cap naively, they will take part of the calculation and inflate the numbers. Easy win.
To combat such manipulations, websites like coinmarketcap.com have algorithms that only take circulating supply into account. Meaning only tokens that touch the market and can actually be traded are counted towards the market cap.
Now we all know that TON is a top 30 project and we all expect it to even climb to the top 5. But, if you were looking in coinmarketcap.com just a few months ago, you would see TON ranked in market cap somewhere around place 250. Many legitimate TON coins were not taken into account and the market cap was incorrectly low.
Fixing the circulating supply
It is in the community's best interest to identify and signal the true circulating supply of TON. Take an artificial number that is too low - then TON drops in the rankings since the market cap drops. Take an artificial number that is too high - then you signal to investors that many tokens can hit the market and the token price drops.
To help find the true number, the community has been actively telling holders for a while, mainly genesis holders, to move their tokens. This is particularly important if these tokens have never been moved since they were mined. It's enough just to send them to another wallet that you control. What this action does is signal that these tokens are part of the circulating supply.
The issue we have is that a significant number of tokens, that all came from genesis mining, have not been moved. Even worse, these tokens are in wallets that were never even deployed. As you know, unlike Ethereum, TON wallets are smart contracts. When you use a wallet, you must first deploy the smart contract code that operates it to the chain. Until you do so, the wallet is uninitialized. It turns out that the tokens that never moved are in wallets that are not even initialized.
The project needs to give certainty to the market as to how many tokens were mined during the genesis program. This is what this proposal is all about.
A gentle solution
First, the proposal is only applicable to miners that have lost access to their coins. If a genesis miner has access, they are free to move the coins once and thus take them out of the list of uninitialized wallets. We know from other ecosystems like Bitcoin that a large percentage of mined coins are lost forever to wallets that don't have properly functioning private keys.
Second, the proposal is very light and doesn't freeze uninitialized coins forever. It asks to freeze them only for 48 months. What this does is gives certainty to the market for the next 4 years about the number of coins distributed in the genesis mining program.
This is why the proposal is described as dealing with "Tokenomics". A big part of TON tokenomics is the number of coins generated by genesis mining. This number could have been chosen to be somewhat arbitrary. The market prices TON coin accordingly.
Bottom line decisions
My personal opinion is that this proposal should pass. I'm not concerned that somebody will ever take or freeze my tokens. I think that parameters like how many tokens were actually mined are important to set accurately. I think the market is waiting to see if the community makes a responsible decision and if the proposal passes, investor confidence in the project will rise.