At the time of writing, Ethereum’s presale has entered its next phase, where the price of 1 ETH dwindles in a downward linear progression through the sale’s end. The presale thus far has seen more than 48 million ETH presold, which even if calculated at the original price of 1 BTC / 2000 ETH is more than US$14 million.
On Wednesday, the Wall Street Journal reported “mixed emotions” among “Bitcoiners” regarding the Ethereum presale because a few people on Reddit called Ethereum a scam.
“Then there’s the other concern: Will the Ethereum team start dumping all their accumulated bitcoins and, if so, what will that do to the digital currency’s price?” Michael Casey wrote on the MoneyBeat blog.
I smell some subtle fear mongering, and I also think I can dispel the WSJ’s concerns.
Where the Money Will Go
First, let’s address the hypocrisy embedded in this piece’s headline: We already know what Ethereum plans to do with the money it’s raising, and there is enough evidence to render moot speculation that the project’s leads might do otherwise.
According to Ethereum’s Intended Use of Revenue plan, the presale has already achieved the goals outlined in Scenario 2. If the presale were halted right now, we know that US$2.8 million is earmarked for legal contingencies and expenses that accumulated prior to the sale. That leaves about $US11.2 million.
Just more than US$8.5 million in this scenario would go toward delivery and development of the Ethereum platform and its tools. Another US$1.5 million would go to “community outreach,” and the remaining US$1.1 million would go to the Cryptocurrency Research Group (discussed here).
For anyone checking my math: That other US$100,000 got lost in my rounding off numbers.
On Tuesday, CryptoCrumb’s Forensic Blockchain Analysis blog analyzed where the money from Ethereum’s presale was going.
“First, [Ethereum’s] balances are stored on the blockchain and are not siphoned off to some off-chain account,” Danno Ferrin wrote. “This was done in the name of transparency. Second, the exodus address had a whole lot less activity [than Swarm, to which he was comparing this presale] prior to the sale.”
You can read the whole analysis here. The key takeaway is Ethereum appear to be acting transparently with their funds.
“I like the way the Ethereum presale is going better than the Swarm presale,” Ferrin wrote. “My main reason is that they are keeping the balance on the blockchain, where community members can audit it, rather than as some database row in an unknown exchange.”
Would the Ethereum Team ‘Start Dumping All Their Accumulated Bitcoins?’
We cannot know the intentions of the team members with 100% accuracy, but I would be willing to bet Ethereum are not running some very elaborate pump-and-dump scheme.
First of all, the people behind the project are too active and too recognizable.
If co-founder Anthony Di Iorio tried to swindle everyone, there would be a mob with torches at his incubator in Toronto. And there’s no way Vitalik Buterin could pull some kind of D.B. Cooper heist because he is holding 100 stacks of Peter Thiel’s money. You think Peter Thiel doesn’t know a guy who could find anyone, anywhere?
Joking aside, it sounds as if the WSJ’s reporter doesn’t buy into the scam narrative, either, because he quotes Ethereum co-founder Joseph Lubin at length to end the piece.
“Some of those bitcoins will be sold for dollars at some point. ‘We won’t keep it all in bitcoins,’ Ethereum co-founder Joseph Lubin said, citing a need to convert into traditional currency to pay developers and to diversify Ethereum’s holdings. But he insisted that Ethereum ‘won’t be dumping big chunks of it on the bitcoin market’ and that ‘it will be done prudently and without telegraphing.”
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