As Ethereum prepares for the move to proof-of-stake, how network tokens have been distributed is coming back into focus.
Indeed, Lubin’s holdings have never been more relevant, as Ethereum nears the end of a multi-year development to overhaul its consensus algorithm. Proof-of-stake — the new security protocol, at the heart of what these trust minimization machines do — will secure the largest smart contract blockchain by market capitalization, Ethereum, by requiring people to post collateral.
Or, as Kim put it, “capital is what directly influences who can participate in building blocks, propose transactions, and create network consensus.” In other words, what’s at stake is the prospect that Lubin controls the world’s most widely used blockchain.
Onstage, Lubin was “comfortable” saying his holdings “have never been even close to half a percent.”
This differs from previous estimates, which at one point put Lubin’s ownership at between 5% and 10% of the total circulating ether supply. Forbes cited those numbers as naming him the second richest person in crypto in 2018, and what U.S. Securities and Exchange Commission Chairman Gary Gensler thinks, though the data is almost certainly out of date.
Lubin, who previously founded a quantitative hedge fund and served as Goldman Sachs’ vice president of technology, was with Ethereum from the start. He was likely one of the top buyers of ETH during the network’s $18 million initial coin offering (ICO). It’s also likely that as Ethereum’s COO, he received a fair share of the estimated six million ether that the Ethereum Foundation distributed to “early project contributors.”
But there are several complicating factors, such as the fact that Lubin has spent the past five years funding, often out of pocket, hundreds of Ethereum startups and open-source protocols through venture capital studio ConsenSys. Lubin, while a committed ecosystem leader, has also likely liquidated ETH for fiat over the years.
“I haven’t done anything other than spread the tokens,” Lubin said, adding, “I haven’t acquired any tokens since genesis. (Ethereum went live in 2015 and was preceded by a “pre-mine” that pre-allocated 60% of its initial supply.)
Lubin cannot prove these claims unless he reveals all of his alphanumeric blockchain addresses, which is akin to someone sharing his bank details. Although “openness” and “verifiability” are the guiding principles of the digital asset industry, on a personal level it may not be our business.
Lubin certainly influences Ethereum and is often seen as a generous – albeit debaucherous – leader, benefactor, and investor. Despite being sued by former employees, being criticized for getting close to JPMorgan and nearly driving ConsenSys to the ground (after pursuing an investment strategy that was less “incubation” and more “throw a hundred eggs in the air”), his vision and the capital is at the heart of Ethereum.
Lubin described ConsenSys – which initially incurred no debt, took no investments and nearly went bankrupt – lovingly as a “global body”. But this is an organization that, in its early days, spent $100 million in cash a year. A significant percentage of its for-profit operations have failed, although it is also responsible for essential software like MetaMask which is free to use.
New research from Kim at Galaxy shows that although very centralized at first, Ethereum’s supply has become more distributed. Analytics show that many accounts that received the largest ETH sent a significant amount to centralized exchanges.
“Conversely, only 1.6 million ETH (~2.3% of premine supply) stood still,” she wrote. Mining, the computational process that Ethereum is abandoning, has also diluted the total first-user supply, a process that will slow significantly after moving from merge to proof-of-stake.
“From what I know, I have no fear that there is any sort of concentration among the original owners,” Lubin said.
A less equal distribution of capital within Ethereum has long been a bane of critics who see it as a measure of fairness. But once secured by proof-of-stake, these numbers will have a direct bearing on Ethereum’s censorship resistance or credible neutrality.
Theoretically, proof-of-stake security allows anyone to contribute and get paid for network validation (unlike proof-of-work which requires significant initial capital to purchase specialized computers called miners).
But third parties have already emerged and capitalized on staking, in part because becoming a validator costs 32 ETH. Cryptocurrency exchanges Coinbase, Kraken, and Binance account for just over 20% of total ETH staked, Kim wrote. While Lido, a so-called liquid staking protocol, was a forerunner in the space allowing incremental deposits of ETH, it is now “the largest controlling entity for staked ETH”.
Lido’s staked ETH token is now trading at a 5% discount to ETH, in part because it functions as a bond redeemable for an asset at par at a later date. But amid a market bear cycle, there are also potential liquidity issues and implications for protocols like Celsius that have collateralized their holdings using Lido and may not be able to redeem their clients’ funds in full. .
The concentration among the stakers is a much deeper issue than the issue of Lubin’s holdings. In proof-of-stake systems, capital will generate more capital if it is staked, which means that the network will mainly reward those who already have the most.
“ConsenSys is a new type of company, it takes thousands of different tokens in our work,” Lubin said. “We’re doing our best to accumulate ether tokens before this thing called the fusion…which we’ll just assume will go well. »
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How Much ETH Does Joe Lubin Hold? | Cryptocurrency
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