It’s been over a decade since Bitcoin was introduced to global finance. In 2022, newer crypto assets are appearing in the market daily because of the increasing investments into the decentralized finance model Bitcoin brought forth first. While DeFi has come a long way in all these years, the lack of proper business distribution models for cryptocurrencies keeps them from going fully mainstream. Developers focus on what shall be the transaction method, consensus mechanism, blockchain model, etc. but not on how it will be marketed. It is a rather important dilemma to be tackled. In this post, we are going to be discussing cryptocurrencies distribution models in detail.
Introduction to Cryptocurrency Models
Cryptocurrencies have become a stable decentralized medium of encrypted data transfer and transactions. Their growing popularity has also made many developers and coders bring forth new blockchains with advanced functionalities, or fork the existing ones to create newer cryptocurrencies.
Amongst all this, preparing a proper model for a crypto asset’s business distribution is also important. The theme of the asset, who will be regulating it, what community gets benefits, what will be the marketing strategy, etc., are important aspects to look into. The short-term distribution model currently includes one-way transfers, two-way pegs, pre-sales, pre-mines, asset carryovers, etc. The financial aspects work fine with short-term distribution, but the current strategy of relying on crypto mining to let newer people into the crypto space leads to wealth concentration. Thus, a cryptocurrency model that supports wealth distribution and better marketing for the asset are desirable in current situations.
Useful Proof of Work as Distribution: A Relaxed Algorithm
Useful proof of work, in contrast to the traditional proof of work, is a simpler algorithm that removes all the irrelevant and complex computation processes. The built-in computational stack trace mechanism removes the obstacles in the proof of work distribution model. In the useful proof of work model, crypto assets can now be easily mined, which will lead to more flow of new currency into the market. This business model will be able to distribute wealth amongst all the holders, and the new investors coming in as well.
The programming environment in this new model does spot-checking and deposit sacrifices to ensure that the process gets completed with fewer irrelevancies. The algorithm is based on creating a Merkle tree by taking the program’s state after each computational step. This computational process and business model are somewhat tricky and require a lot of experience to handle, but they do have the potential to provide a better cryptocurrency distribution model.
Parliaments and Better Algorithms
Everyone likes to be rewarded for their efforts, and applying this to the cryptocurrency model can be very useful. If a consensus mechanism rewards the participants over arbitrary good work, then the motive for proof of work-based algorithms and crypto mining will be enhanced. This approach can be taken up by selecting a particular ‘parliament’ where, for every Nth block, stakeholders can vote on several nodes and get to a decision about where the newly generated funds should be transferred.
This parliament will be able to transfer the newly generated funds to the community and thus distribute the wealth. This will occur in crypto assets, where the parliament would reward the participating miners and coders.
Even though this seems like a good choice, there are several downsides to it, however. One of the problems is crowdfunding, where the parliamentary panel can consist of corrupt regulators. This would lead to partiality and, thus, unequal distribution of funds. Thus, the highest power here should be given to an algorithm, along with regular changes to the parliamentary panel. Such processes can lead to better working of the cryptocurrency business model.
Learning about the solutions to current loopholes in the business and distribution models of cryptocurrencies gives an insight into how much potential decentralized finance still has. It is yet to achieve that final stage of wealth distribution amongst all, making everyone control their finances completely. This can be achieved if new crypto assets follow proper cryptocurrency business models to verify the transactions. Combining the parliamentary model and useful proof of work algorithm can prove to be the perfect approach to cryptocurrency distribution models for all future projects, as well as the existing ones.
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