Securing Digital Rights for Communities (Game Theory and Governance of Scalable Blockchains for Use in Digital Network States)

Chapter 7 – Sustainable Economy & Decentralised Coin Distribution

Distributing tokens fairly and making it sustainable is amongst history’s most difficult challenges

Introduction

A sustainable economy in a decentralised blockchain hinges on properly distributing the coin supply so that no single entity or small group can dominate. Unlike many existing, more centralised models that rely on large pre-mines, ICO's, or purely profit-driven validation, a truly censorship-resistant system needs a continuous, community-driven distribution that rewards actual value creation.

7.1. Token Distribution Methods

Current Main Distribution Methods Include:

Mining or Validating – Earn by providing infrastructure (proof of work or proof of stake).
DAO Proposals (On-Chain) – Fund work or community projects through inflation or a treasury, as voted by stakeholders.
Direct Trading – People buy the coin from existing holders, though this alone does not ensure fairness or broad distribution.
Incentivized Stakeholder Distribution (ISHD) – Also called Proof of Brain, where community members are incentivised with a portion of the daily rewards pool when they vote tokens to those producing valued content or services (for further information see Annex I – Glossary of Terms and Acronyms).

Most blockchains rely on a narrow set of these, often resulting in whales accumulating large amounts of the supply. A robust model should leverage multiple mechanisms ensuring that miners, validators, content creators, infrastructure operators, and general contributors can all earn.

7.2. Incentivized Stakeholder Distribution (ISHD / Proof of Brain)

ISHD awards tokens based on recognized value creation: publishing, curating, developing, marketing, or performing tasks that the community deems worthwhile. Stakeholders vote, and the protocol mints new tokens to reward both creators and voters. This:

Aligns Incentives – People who have a stake in the network (by staking tokens) benefit from finding and rewarding good content or valuable work.
Invites Broad Participation – Non-technical users earn most of the newly minted tokens by contributing ideas, media, or organizational help, rather than being limited to buying or having to do prohibitive technical mining by running infrastructure.

This model counters the typical "pay-to-play" approach, letting anyone enter permissionlessly and earn if they provide real value to the community.

7.3. Making Spam Costly and Creating Competition for Resources Increasing Buy Pressure with Increasing Network Effect

A major problem with public blockchain systems is spam. The chain can easily become clogged up with data of users who are attempting to drain bandwidth on the chain and make it difficult for others to post their own data. The problem is that if fees are charged on each transaction, this can become highly costly and a prohibitive barrier to entry for many users. Each user now requires additional tokens that they must first obtain from an exchange, so that they can pay the transaction (gas) fees in order to post to chain. In social media systems, this becomes prohibitive to users, especially where there are thousands of tiny, micro interactions each day, in replies, likes and distribution of rewards.

This can be solved by making a competition for resources on chain. This may manifest in users being required to stake small amounts of the token. The users who stake the most get access to the most free transactions each day.

In order to help new users onboard, an existing user may wish to delegate some of their tokens such that new users can access zero fee transactions to post to chain straight away. A delegation is a process whereby an existing user can delegate the power or resources of their tokens to a new user, without actually giving them their own tokens. This means that the new user cannot steel the tokens of the existing user, but they can access the chain for free with some of their resources.

Staking for access to resources on chain (transactions, processing, storage, voting, curating etc.) brings about a sustaining buy pressure for the token as long as a network effect takes hold and demand to post information to chain grows over time. This results in a sustainable token price which is proportional to the network effect of the chain as well as the number of new users signing up.

7.4. Social Distribution as a Trojan Horse

Social content distribution can serve as the entry point for far broader decentralised ecosystems:

Wider Token Spread – Many people can create or curate content (e.g., blogging, video, discussions) rather than just a few technical validators or miners receiving all of the freshly minted tokens.
Ongoing Token Flow – Every post, comment, or contribution that gains upvotes injects new tokens into many individual wallets forming a de facto distribution engine to those who contribute and create value.
Moving Beyond "Lunch Posts" – Over time, the community can prioritize content related to actual value (e.g., building projects, marketing the chain, developing infrastructure). This becomes a Trojan Horse for encouraging real productivity and value creation, not just social media.

By starting as a user-friendly content system, the eco-system indirectly bootstraps mass token distribution and engagement, ensuring the coin doesn’t end up in just a few technically capable hands, but rather, also in the hands of many regular people who add value to the network in their own ways.

7.5. Distribution to Multiple Parties & Ongoing Issuance

A single distribution path (e.g., only validators, or only an ICO) creates central points of control. Instead:

7.5.1 Multiple Mechanisms of Distribution to:

Validators / Infrastructure Providers
Social & Curation Rewards
DAO/Treasury Proposals
Developer Bounties
Community Sponsorships

7.5.2 Continuous, Controlled New Token Minting:

The protocol can continuously mint tokens (at a strictly controlled rate controlled by the community consensus), directing them toward contributors who deliver recognizable value.
Zero Founder or Early Stake – Founders should earn tokens alongside everyone else. With no large pre-mine that cements early dominance, founders are more aligned with their community members to add value instead of using them as exit liquidity as is so often seen in many of today's "decentralised" blockchains. For more information on Pre-Mines and ICO’s see Chapter 15. “Censorship and the Morality of Pre-Mines”.
Ongoing issuance means new participants and future contributors can still obtain tokens without purely “buying in.” This fosters dynamic growth and social mobility. It also means new participants do not have to take risks to earn stake in the community, they can just contribute and earn from community votes.
Continuous new token minting means that the community can continuously reward users for contributing value and it an also direct some of this supply to subsidising transaction fees, keeping them as low as possible into the future.
As long as the value created via the incentivisation with freshly minted tokens exceeds the value of freshly minted tokens that are distributed, it is possible to achieve a sustainable, growing token price into the future.

7.6. The Importance of Earning Your Tokens

Many blockchains feature founders or Venture Capital firms (VC's) receiving large stakes via ICO or pre-mine, which often:

centralises Control – Eventually invites regulatory scrutiny as an unregistered security.
Turns Users into Exit liquidity – Early insiders sell off tokens, depleting value for later entrants.

By contrast, in a free, permissionless system:

Tokens Are Earned by Contribution – Documented value creation (e.g., infrastructure operation, marketing, code, or social content) is rewarded.
Founders Earn From Zero Tokens, Fairly like Everyone Else – Community recognition determines ongoing rewards.
Avoiding Scams - Often, tokens that are scamming their users will inevitably bring the conversation around to “buy our token”. However, in eco-system's that are not scams, users should be able to earn their tokens from a neutral, CEO-less protocol. As such, one can do beneficial actions for the community, earn stake from the protocol itself and thereby not take any financial risk at all. This significantly lowers the possibility of users being scammed for their money

For more information on Pre-Mines and ICO’s see Chapter 15. “Censorship and the Morality of Pre-Mines”.

All parties starting at zero tokens and having an equal opportunity to earn tokens from a neutral protocol ensures that no party can claim an unfair proportion of tokens by fiat or capital alone. This aligns the incentives of all members of the community, in that they must first add value before they can take any out as profit. Be it by building of code, purchasing the tokens on the open market, running infrastructure, creating valuable content, documenting their usage of the system or running events to promote the community, amongst other things all participants can contribute and earn a stake in the system as long as what they are doing adds value. This minimises extractive behaviour in blockchain systems where founders have large pre-mines and ICO stakes that they have obtained by decree, without adding value and therefore unfairly compared to the other participants in the system. For more information on Pre-Mines and ICO’s see Chapter 15. “Censorship and the Morality of Pre-Mines”.

7.7. Keeping Inflation in Check

Unlike Bitcoin’s capped supply, a content or community-focused chain might retain continuous tail inflation but at a controlled rate:

Start Higher (e.g., 15% per year) to bootstrap distribution.
Gradually Decline annually until stabilized at a nominal rate (e.g., 1–2%).
Consensus Governance Adjustments – Community-consensus-driven adjustments to inflation based on needs.
In contrast to a capped inflation schedule like on the Bitcoin Blockchain, where fees will remain high in order to pay for the security budget of the chain, a chain with a long tail emission can keep fees very low or free, which is more applicable to social layer with high interaction and transaction volumes on chain.

The real test is whether the community’s total value output (value creation and demand) outweighs the value of new token minting.

7.8. What You Want to See Vs. What You Don’t

What You Want to See:

No Pre-Mine, No ICO
Multiple Distribution Paths
Small, Controlled, Consensus Driven Inflation
Broad Middle-Class Growth or Path to it
Permissionless Entry
Ability for Low Tech Users to Earn Stake Without Taking Financial Risk

What You Do Not Want to See:

Massive Founder Stake controlling a disproportionate supply.
Single Distribution Channel funneling all tokens to only a few, often technically capable entities.
Excessive, Open-Ended New Token Minting leading to token devaluation.
Stagnant Social Mobility preventing smaller holders from growing, even when they voluntarily add value to the community.

7.9. No Compromise on Free Speech & Censorship Resistance

Projects aiming to secure digital human rights cannot allow:

Pre-Mined Central Control – Easily coerced by governments or powerful interests.
CEO/Company Structures – Single legal entities are direct regulatory targets. they are also more coercible than anonymous individuals operating on such systems who are mobile and can move jurisdiction when pressured.

A neutral, ownerless base layer ensures speech and user accounts remain unstoppable.

Conclusion

A sustainable coin economy arises from continuous and equitable distribution to those providing recognized value. Systems relying on single distribution channels, large pre-mines, or purely fee-based mining tilt toward centralisation. In truly censorship-resistant networks:

ISHD (Proof of Brain) must be a major pillar of governance token distribution.
Low Inflationary Tokenomics prevents excessive dilution while funding future participants for providing value to the community.
Strict Vigilance against centralising whales or external money attacks that do not align with the values of the community.
No Founder Pre-Mines for chains protecting digital rights.

By following these principles, a blockchain fosters a self-reinforcing, sustainable economy while remaining resilient to both internal power grabs and external regulatory pressure.