Thanks for the analysis Viktor, and for highlighting some of the areas that future iterations of MerkleMining should seek to improve upon. I think in particular a longer mining period (slower ramp on the incentives), and more PR would have helped to raise awareness amongst even more participants and enabled a more balanced distribution. But Livepeer created an open access mechanism that anyone could participate in, and it ran for five months, transparently communicating about the mechanism to the world from well before when it began, so it certainly wasn’t a short lived opportunity relative to other mechanisms. I think no one will disagree though that the Livepeer team is better at building video software than marketing/PR :) There are a couple points I disagree with or wanted to provide some clarifying information:

  1. MerkleMining did effectively target the actual users in Livepeer’s case. Transcoders (and delegators who QA the network) are crypto-economically savvy, technically oriented users who, in their day to day job of operating the network and ensuring its quality, have to perform very similar actions and respond to similar incentives to the process of MerkleMining. This worked very effectively in that the network attracted many new transcoder operators and delegators through the mine. Keep in mind the end users of Livepeer’s network — video developers — pay fees into the network in ETH (or eventually a stablecoin), or they’ll just use the network through an abstraction layer like an API or product, so they have no need to be aware of the Livepeer Token or the Merklemine. It wasn’t intended to attract them.
  2. The argument that MerkleMining is prone to centralization because you can’t stop a whale from acquiring a large amount would also apply to any open-access, permissionless protocol (including PoW).
  3. The idea that non-participants get their power in the network diminished over years is not a weakness, it is an intentional design choice to incentivize participation. See https://medium.com/@petkanics/inflation-and-participation-in-stake-based-token-protocols-1593688612bf. The purpose of delivering a little LPT to many addresses is not about protecting their future stake, it’s about granting them access. In a PoS network you actually need the token in order to start participating — so this ensures that at any point in the future that they discover the network, they aren’t boxed out from at least engaging with the experience as a delegator — and then they can make their mind up about taking a larger stake to participate more.
  4. When people look at the Etherscan distribution they don’t realize that the #1 wallet, with 20% of the token, is the staking contract which represents the stake amongst many hundreds of users (many of whom participated in the mine and fully staked). If staked, their ethereum account balance will show as 0 and not show up in the etherscan distribution, since they’ll be subsumed in the #1 account. This is where it’d be better to observe the distribution of participation, than the unstaked LPT — since, as mentioned above, it’s really the participants (and those who will choose to take a stake to participate in the future), who will generate much of the future LPT on the network.

Anyway, hope this clarifies some of the points. All in all, I completely agree that new iterations on MerkleMining can be improved, and that new experiments in distribution mechanisms can optimize for different criteria.

Building live streaming on the blockchain at Livepeer. Previously Founder, VP Eng at Wildcard and Hyperpublic (acquired by Groupon).

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