How was ETH initially distributed

The Ethereum network started off with a supply of 72 million Ether (ETH). Eighty-three percent of that (60 million) was distributed to people who had purchased ETH in a crowd sale that was conducted in July and August of 2014. Crowdsale participants, who likely numbered in the low thousands at most, sent a total 31,000 bitcoin to a specified Bitcoin address in exchange for an Ethereum wallet address and a promise that, at network launch, they'd receive the ETH they purchased. Participants spent the equivalent of approximately $18 million, which put the sale price at an average of about $0.30 per ETH. The money raised in the crowd sale was used to pay for development of the Ethereum protocol, legal expenses, communications, and research.

Of the remaining 12 million ETH distributed at the launch of the network in 2015, half was split amongst 83 early contributors to the protocol based mostly on time contributed. The other half were set aside for the Ethereum Foundation, a non-profit organization tasked with promoting adoption and further development of the network.

The relatively small number of crowd sale participants meant that the initial distribution of ETH was concentrated. While, over time, ETH's distribution would become more widespread as early buyers sold off a portion of their holdings to new entrants and as supply was added by Proof of Work mining, ETH would remain highly concentrated for quite some time. For example, a report from blockchain analytics firm Chainalysis found that, as of May 2019, just 376 individuals controlled 33% of the circulating supply.

Why is this important?

Wide distribution of tokens is important for the health of a public blockchain primarily because it supports decentralization - a key value proposition of the technology. When tokens are widely distributed, the network is less susceptible to influence and collusion by a small group of participants, something that threatens the 'credible neutrality' of the network. Wealth concentration may be exacerbated in Proof-of-Stake systems, like what is planned for Ethereum 2.0. Further, the dangers of wealth concentration are said to be more acute in Proof-of-Stake systems.

Read more: What is Ethereum's monetary policy?


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