What Is Coin Supply Distribution
Decentralization is a common topic in cryptocurrency, and in fact is one of the main underpinnings of using distributed software to run asset networks rather than companies, banks, or governments.
Bitcoin pioneered the proof-of-work (PoW) mining approach, with computers (and later specialized mining machines) solving complex equations in order to secure the network, each awarded a portion of the new coins created in proportion to their participation.
This has led to a collection of global currencies whose supply is theoretically accessible by all and restricted to no one, reducing fears of centralization of the monetary supply and the manipulation risk that comes with it, as has been a criticism of central banking.
It’s important to look at different coin supplies, and how their distribution models work, in order to get a grasp of decentralization in cryptocurrency.
Transparent blockchain data keeps anonymity, but allows trends to be inferred
One of the main value propositions of cryptocurrency as originally conceived is its pseudonymity, which identifies addresses and transactions through digital cryptographic signatures, but leaves out any overt connection to the identities of its users. As such, ownership over a coin’s supply cannot be proved without supplementary identifying information, usually voluntarily disclosed. This means that, in theory, a single group or individual could own or control the entirety of a coin’s supply, and simply separate it into addresses and network activity that hides this.
However, the radical transparency of the public ledger can allow quite a bit to be inferred. The entire supply’s distribution, both in which addresses they reside in and the average distribution sizes, to infer approximate ownership. While analyzing a blockchain such as Dash’s can’t for certain tell who owns what, it can convey a greater sense of the coin’s distribution, and the decentralization of its supply. This is particularly important when weighing factors such as stake and ownership, ability for the price to be manipulated, and decentralization of elements which require the proof of stake in the network.