In yesterday's article, I mentioned all the wrong ways to do an SMT distribution. This is focused on the right way to do an SMT token distribution.

Best SMT Token Distribution Practices!

There are some key elements to ensuring a token is valuable. Let's take a look at some of the more successful practices lately:

• Vesting Terms for Founders
• Incentivize Hodling
• First rewards to Stakers/Hodlers
• Utility before liquidity

Vesting Terms for Founders

Creating a token has gotten easier. The ERC 20 token standard, used on the Ethereum blockchain, has made it easy for anyone with coding to create a token.

Unfortunately, it also makes it incredibly easy to create a scammy ICO, collect ETH/BTC from eager "investors", and then dump a bunch of tokens semi-anonymously on an exchange (that was bribed with tokens by the founders).

Vesting schedules help prevent this. Vesting is a common practice in startups. It motivates founders so they don't get rich so fast that they lose the desire to work.

Let's face it: making $2 million overnight would make it difficult for many people to stick to a project, no matter how much they say otherwise.

You, sleeping on your ICO money

Vesting schedules can be time based or milestone based. Time based ones might prevent founders from selling their tokens until 2 years after an ICO. Milestone based schedules might require founders to complete certain deliverables before they can cash in their tokens.

Vesting schedules increase founders' skin in the game, motivating them to give their best effort (which in turn should increase the value of the token). Any respectable project should have publicly available vesting schedules for founders.

SMT Solution

Each SMT website should have a page dedicated to each team member who is receiving rewards in tokens, with an accurate count of their personal SMTs from the project. The vesting schedule should be easy to find for investors both before and after the project is live.

Incentivize Hodling

Tokens that reward hodling will hold their value longer than those that don't.

This doesn't mean that hodlers should expect Bitcoin levels of price appreciation. While price appreciation is nice, it is less likely if there is zero benefit to holding a token over a long period of time. BTC (and ETH after it) appreciated greatly because they were first movers with limited (or no) competition. Newer tokens don't have that luxury.

There are a number of ways to incentivize holding. One is by staking coins: using a Proof of Stake (or Delegated Proof of Stake) system that gives out tokens to those with a stake in the system. Another is by giving benefits to those who lock their tokens.

Steem Power is an example of a way to take advantage of both of these. SP gains steadily from inflation: 10% of the reward of every block created on Steem is given to SP holders. Furthermore, powering up Steem allows users greater influence on the blockchain. Those with high SP give out high upvotes, and they more directly influence what is trending and what is not.

SMT Solution

Remind SMT holders of the value of powering up SMTs. Gamify Power Ups: show those people who have the highest SMT Power, and highlight the curation rewards they're earning by keeping their SMTs Powered up.

This might best be done as an opt-in, as some people don't like their token balance to be super public. Time will tell what works, but don't be afraid to highlight your influencers.

First Rewards to Stakers and Curators

This goes with the above. Giving stakers-those who lock up their tokens-the first rewards is a great way to energize your community members and keep them involved in the project.

Some ideas that could be done are giving a 25% bonus to those who have remained Powered up for a certain amount of time. For example, a community fund might hold 1 million SMTs that delegates SMT Power to those who are holding:

• The most SMT Power
• SMT Power for the longest
• Most active community curators
• Random weekly SMT Power holders

SMT Solution

All of the above bulleted ideas. Keep a community fund of perhaps 5-10% of tokens powered up to upvote and encourage users through delegation boosts.

Utility Before Liquidity

Liquidity was an early benefit of ICOs, but it also drew a ton of scammers. It is good that ICOs allow for early liquidity, and it's good that creating a liquidity event doesn't require Wall Street bankers anymore, but it can be a double edged sword.

Liquid tokens, before they can actually be used, is a recipe for disaster. Timelines are tough, and token utility is often pushed back weeks or months.

Those who have been in crypto for a while, and software developers, understand this. But this can make investors impatient.

SMT Solution

SMTs will have a built in solution, as they should be usable out of the box. Nevertheless, dApp builders need to ensure that their SMTs are delivered ready to support their platform.

With the high level of dApp development already happening (@appics, @steepshot, @dtube, @vimm, @steemhunt, and so many others), I don't see this as much of a problem, but it should still be considered for those making an SMT. Don't just put together an SMT, and then make a dApp around it.

Conclusion

Creating best practices for SMTs will be a work in progress the whole community will engage in. We will all know much more about what makes a successful SMT launch in one year than we do now. Even so, we can follow these guidelines and maximize the utility of tokens that are in development now...and bring greater utility and investment to the Steem blockchain by doing so.

Did I miss anything? Let me know in the comments below. HF20 is behind us and I can't wait until SMTs go online.

-Jeff

P.S. In case you missed it, here is my previous article on SMTs, highlighting the worst practices.

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Posted from my blog with SteemPress : https://steemmaker.com/smt-token-distribution-2/

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