The biggest risk with Hive Engine tribes is the owner

in LeoFinancelast year


Yesterday I wrote a post where I wanted to talk about what I feel is the greatest risk to stake holders in a Hive Engine Tribe but I got side tracked talking about how easy it is to mess with the market cap of low volume tokens.

Today I want to talk about my original thought, how tribes are at the mercy of their owners and propose a solution to minimize this risk.

The problem

When a tribe is created there are a few parameters selected to configure how the reward pool will distribute tokens. There are two key parameters rewards_token and rewards_token_every_n_block. These two parameters determine how often tokens are automatically issued into the reward pool which is then paid out to pending posts.

rewards_token specifies how many tokens are issued and rewards_token_every_n_block specifies how many blocks these tokens are issued. Each tribe defines these differently but combine the two parameters create the core parameters for the inflation in a tribe.

There are two more interesting parameter that controls how much the reward pool shrinks as time goes on. 'reduction_every_n_block' specifies how many blocks the rewards get reduced and reduction_percentage determines by how much.

Let's use POB as an example and show these parameters in action.

Review the ScotBot API, I can see POB is set up with these parameters.

"reduction_every_n_block": 42000000
"reduction_percentage": 50.0
"rewards_token": 10.0
"rewards_token_every_n_block": 40

Here 42000000 represents 4 years, and 50 represents a 50% reduction in tokens. POB is set up to issue 10 tokens every 40 blocks, or 2,628,000 tokens in the first year. Most tribes have an initial supply where a certain amount of tokens are allocated to different things like bounties, airdrop, team funds, and this amount is specified in the initial tribe announcement or white paper. The initial supply and these four parameters allows you to calculate the inflation of a tribe token and give you some idea of what to expect as time goes on.

Technically the inflation of POB is 262800000.00% as it started from one single token. Most tribes have an initial supply of 10 million tokens or some large number that reduces the inflation to about 5-25%. After the first 4 years, POB will have an inflation rate of 17.71% after the first halving. This is more in line with other tribes.

Here is the thing though, Hive Engine provides no protection to stake holders on these numbers. A tribe owner can issue tokens whenever they want, and even change the golden four parameters that controls the reward pool.

Here you can see I am free to issue (MINT) as many tokens as I have left in my max supply. In most cases, no one would ever know. This allows tribes to print tokens whenever they want beyond the promised initial supply and in excess of the promised inflation.

In many cases, all the initial supply will not be issued immediately. For STEMGeeks I allocated 10M STEM to the initial supply and most of that isn't issued. When a token is created most will allocate some really large number like 5 billion as a max supply as they are not 100% sure what the inflation will be at the time and they want some room. Once I calculated how STEM will be distributed, I burned 4 billion tokens to provide a contract that I will never issue those tokens.

This is a large risk for all stake holders, tribe owners can issue tokens as they please and no one is auditing or watching to keep them accountable. When wLEO v1 was hacked, more tokens were issued to reimburse those who lost tokens. I am not 100% sure where these tokens were issued from, I believe @khaleelkazi used the team supply or bounties, I forget at this point, nor do I know if it is all accounted for and audited. It could have been a straight issue tokens which would increase the inflation beyond what was promised initially.

In the case of POB, the initial supply was 1 and the only tokens issued would be through the reward pool via the ScotBot Engine. In theory, but nothing stops them from issuing tokens for whatever reason they want and frankly no one is watching.

This ability for tribe owners to issue tokens outside of the initial supply and outside of the reward pools specified in the whitepaper or tribe launch is a risk to all stake holders and a way to undermine their investment. I haven't done enough research to see how often and if ever this has been done, it would require a lot of work to compare what was promised and audit all the issued tokens.

I think most people are already aware of this concern, if not you should be when you are talking about market caps in the millions and inflation rates already in the 20%+.

A potential solution

I recently was thinking about this after a discussion with a large stake holder in another tribe, and I think there is a solution that would eliminate this risk and provide more transparency to all stake holders.

I propose a new parameter and a change to the smart contract that handles Hive Engine. I am not sure if this is even possible or practical at this point in time but it would eliminate this concern.

I propose Hive Engine having a new parameter when creating tokens that can never be changed. This parameter represents the initial supply of a token. When you create a token you specify the max supply of the token that represents how many tokens can ever exist.

With a new parameter representing Initial Supply, a token can be blocked off from issuing any tokens beyond this Initial supply parameter. For this to be effective, the smart contract would need to be adjusted to not allow a token owner to issue tokens beyond the initial supply but still allow ScotBot to issue tokens via reward pool payouts.

I also suggest some way to disclose when a token is issued and when ScotBot issues it to the reward pool. This currently isn't possible without changes as even if an issue was stamped with what did it, the tribe owner still has the same access as ScotBot.

Seeing as both the tribe owner and ScotBot both use active keys to issue tokens, this is a rather difficult problem to solve and why I am such a big advocate of native smart contracts on Hive to eliminate these type of risks. There is also a solution to this I had in mind, using multisig to have an official ScotBot sign the transaction along with the token owners account to ensure a transaction was done via ScotBot and not the token owner. While this is a viable solution to this problem, the new "SMT" direction of Hive Engine allows tribe owners to completely own the ScotBot and Indexing process making this a moot point.

By making these changes, stake holders will have some guarantees the inflation will be as promised and not deviate in an undisclosed and sudden fashion, it would also increase the ability to audit and report on token actions.

As tribes break the 1 million USD market cap, there is a responsibility to provide more protection and risk mitigation to stake holders so they don't become bag holders.

I suggest @eonwarped, @thecryptomancer, @aggroed give this some thought and see if it is even possible under the current system.

There may not be a good solution to this in the current ecosystem, but I wanted to throw out some ideas that could be talked about by the Hive Engine team and make everyone more aware of this problem and come up with solutions. Investors also should be fully aware of the risks involved.

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Why you should vote me as witness

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Your posts are pure gold!

Thanks for teaching me something new once again.

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Your posts are pure gold!

So much agree with such a statement.
That is why I did 4x reblog, 3x 100% UP , and 2x promotion

Nice of you :)

Yeah, it's the truth. Very educative.

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 last year 

Thank you. Much appreciated. I try to spend time explaining and sharing ideas as much as possible.

soy nuevo en hive pero me a gustado el post

Welcome to the platform!

!LUV 1

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@daddydog, you were given LUV from @lordneroo. About LUV:

Very important insights, and I support your suggestion to add an "initial supply" parameter, that cannot be changed, and does not allow to silently print more tokens to the tribe owner.

How does max supply work? Does it stop both manual token printing and reward printing, when this number is reached?

 last year 

You cannot print past max supply. I’m not sure how much this has been tested as most tokens haven’t hit it but I assume it works. At that point you can only trade.

 last year Reveal Comment

Thank you, Marky!

This is a serious conversation to be had with the project manager of a tribe token. Happens to be POB is the tribe we were engaging in a long discussion with the tribe owener @proofofbrainio .

I was explaining how I was interested in his project, and like to help. Mostly I was focused on the 'promised' reduction of inflation by 50%. As a stakeholder I like know how safe is that promise.

Many thanks to bring it to our attention. I think this is a serious conversation we should have as opposed to discussing who get what reward and how we got our hive token as that was something I was answering to @proofofbrainio a few minutes back.

 last year 

The promise is contract. There is a 50% reduction in 4 years. Most tribes reduce yearly but they went 4 years.

It can be changed and most people would never know. This brings me to some of my other ideas.

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That is very interesting, so it depends on the 'choice' of a single individual. That is scary :)

I can't remember the number of posts of yours I've read. You never fail to disappoint in your communications. Thanks for your efforts. Quite the important point to communicate.

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 last year 

Thanks :)

This post is gold! It will be go to for sharing this information. I wasn’t aware of this as I’m new to interacting with the tribe tokens. Good information for all on hive

i thought it was aggy. :P

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wen real SMTs?

We're still slowly building out a second layer (which will also handle #projectblank content storage/rewards) but other projects have taken more focus lately.

Hoping someone steps up and does a real decentralized and secure L1 or L2 token protocol for Hive so we don't have to.

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You're probably aware already, but just in case you weren't, our team is planning to create a layer 2 smart-contract-based token system. Current plan is to build it on top of HAF.

Excited to see that come to life! 🦁

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 last year 

This to me is the most exciting improvement I can think of for Hive.

I love it. Still the plan with its own token and doesn't use hive as a token? :) I would love to see hive for it :)

For technical reasons (ability to control the fee token on the 2nd layer), I think the most likely way we will need to do it is make an airdrop of the L2 token on Hive holders that is strictly proportional to their Hive holdings.

For the short term, it could be okay. But for the long term Hive would profit much more if it would be the Main token.

Only for the reason social + smart contracts = Hive (token).

It is better for marketing, Users, and Investors IMO. The Sidechain that would offer this, would become the main sidechain for Hive in the long run.

20 different sidechain tokens are difficult and make everything too complex in a long run.

I think we will have at some point one smart contract chain, new tokens will build on it.
The best case it would use Hive.

Because after the Airdrop, new users need to buy another token, and hive would stay pretty much the same.

Only for the point of marketing would it be a big favor.

I don't like Hive engine because of the Tokenomics. It's not for every Hive user that holds hive and belive in hive. It has its own space and it's not fully connected. Otherwise, I had invested time and money in some ideas I have on it :)

I think Binance has done it smartly. Maybe it can be something for hive too. You are the technical expert :)

It does baffle me when I see people with huge Tribe stakes and no real Hive stake, precisely for this reason.

I have tried to dig people about it in the past, really out of concern for their wealth.

Putting your wealth at the mercy of ONE person, whose identity may even be hidden, now that's a high level of risk tolerance!

Be prepared to lose ALL your Vest!

It really is time for more protection.

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Putting your wealth at the mercy of ONE person, whose identity may even be hidden, now that's a high level of risk tolerance!

Or risk ignorance, which I feel is more common.

Probably in terms of number of people, not if you stake weight it!

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That's why when I decided to power up all my earnings, I decided to power up hive as well. Who knows what will happen in the future !

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It makes sense, Hive is the only token with any real degree of security!

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This is highly educative ,, thanks

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Well said, it eliminates some of the risk for sure! Eat !PIZZA and think more....

Animated GIF-downsized (4).gif

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@themarkymark! I sent you a slice of $PIZZA on behalf of @stickupboys.

Learn more about $PIZZA Token at (3/20)

Thank you for pointing this out. I saw some rumblings from other posts that weren't very coherent on the exact issue and this details and clarifies it.

We are in the process of making our own token within the next few weeks and had no idea there was an issue such as this.

I hope they can fix all current tokens(maybe a fork for everything?).

So, in case of POB , I see the total supply in the front end is 723,163.87 and they say that will be like bitcoin. So, they have the limit of 21 million tokens. But, how often they gonna print tokens and it depends on what ? And where the investors can be sure that's impossible to print more than 21 million ?

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 last year 

The max supply is fixed at 21M

If it is like Bitcoin, it will be printed for around 130 years.

The first Bitcoin was mined 2009 and it is estimated the last will be around 2140.

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The most funny thing is - in the last 42 years ~(2098-2140) of mining, less then ONE full Bitcoin will be mined. Just think about this.

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 last year 

Crazy when you think of it. Makes you wonder how the market will react. Bloomberg is predicting $400k Bitcoin by the end of the year (highly doubtful but shows what big names are thinking).

I can’t imagine when it is no longer printing

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wow, that's a long time to wait. I thought we will witness the 21 million bitcoin. Let me leave it for my son, so he will live it to my grandchildren. That will be at least a good inheritance to leave.

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That's why serious people count on Titanium plates for their cryptos.
Most likely it will by OK by year 2100:

think about someone in the future will look at the data, how it starts and how it goes. crazy if we think in this large timescale :D

 last year 

I have been considering palladium and silver, but I currently own no metal.

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it is crazy to think about it. The best time to buy/add btc was yesterday :) second best, today

That makes a lot of sense to me. I know there are quite a few tribes that have an ungodly number of tokens for who knows what reason. Likely what you said here. They just didn't have a clear plan so they wanted to have some wiggle room. Locking in the cap right from the beginning seems like it could make things safer.

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Good points but I don't 100% agree with the premise "no one is watching". Maybe 80% agree.

I wasn't aware of 5 million BLOG tokens being issued until @faireye posted about it. Presumably since @faireye was more interested in BLOG than I was. In the case of BLOG I think that demonstrates your point but also the need to at least know the owner/team's usernames behind the tribe. @blogtoken issues BLOG tokens but who created @blogtoken?

I think the better known tokens like LEO and your STEM are a little more secure because an owner/team's good reputation is linked to the tribe and token. It could happen but I think it's less likely someone who has been active for a while on the platform and built up a large reputation score would suddenly one day "pump and dump" or play obvious games with the token price. For tokens with more than a four week unstaking there's time to notice an owner unstaking their tribe's token.

 last year 

Good points but I don't 100% agree with the premise "no one is watching". Maybe 80% agree.

No one really is, there is so much noise with the author and curation rewards it’s hard to weed through it. You also don’t know what is a disclosed issue (mentioned at tribe launch) and what isn’t without full accounting.

It’s really hard to make sense of it and Hive Engine doesn’t have the best reporting.

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Didn't ned do all that?

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Why would these parameters not be fixed from the outset? Is there any justifiable reason for fiddling with them later?

 last year 

These parameters are suppose to be fixed but there is an option to pay 100 BEE to change the parameters. Although I don’t think they get changed that often. I know neoxag mining changed the parameters early on.

The 100 BEE fee was to discourage tribe owners from changing economics often although they charge 100 BEE now for any change even blocking spammy tags.

I don’t think changing parameters as as big of a concern right now as it isn’t done often but potentially could result in a ninja change that changed the dynamics a lot. For example a tribe owner could remove the mining pool or reduce / grow it in the future. Like how Pal virtually removed all proof of brain and made Pal primarily a mining token.

Some changes can be pretty drastic.

In the end the real problem is these are soft contracts and are only enforced as long as they are not changed. Some things like issuing tokens are not enforced at all.

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Thank you. I appreciate the in-depth reply and of course, new knowledge.

So the Skatehive community is planning to launch a tribe, and we're currently debating the tokenomics. Aggroed suggested we make more tokens than we think we'll need, and just do token burns to control inflation. That seems to make sense, but when i see the success of POB, i wonder if would be better just to mimic it with a few slight tweaks?
What's your thoughts? Also any other articles you'd suggest we read?

 last year (edited)

I started STEM with 5 billion tokens, once I figured out the tokenomics and prior to going live I burned 4 billion tokens leaving 1 billion. This is still far too much as 50 years of inflation is around 51 million tokens.

The thing about burning tokens is not to make any promises. Do it and report it don’t promise as this puts you at risk of being a security.

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Thank you for explaining these risks, suggesting potential solutions. Those who have invested in tribes that didn’t do well May now understand some of the parameters of inflation and its effect on their investment.

I've always imagined tokens just appear from thin air.

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 last year 

They kind of do.

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Wonderful post.


I had this doubt about the power to print more tokens. But I never went deep into research to find out.

That's also why I don't intend to spend all my HIVE Power on tribe token. Just giving stakes which I get paid a lot of the time.

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I thought of it before when I saw the BLOG token owner issue like a million tokens and started playing market maker on the market. I still get them tokens but I don't really think they are really worth anything.

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Good suggestion, definitely had this thought initially and assumed it wasn't there by design.

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This is a really great post. It does highlight the issues and risks involved with investing serious cash into tribes and the increased risk of losing it all.

Thanks for highlighting it to us.

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Such a great post, @themarkymark! So many good info and ideas on it.

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More info why you see this.

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This banner always reminds me of one of my favorite games as a kid:


Your post was promoted by @taskmaster4450le

That was way above my pay grade but still sounds like a good idea.

excellent information keep it up

What you suggested here is truly valuable. Yeah manual mint became one of the biggest issue here. And I have noted something else too.

At the beginning we can define Max Supply of the Token.
But by using json scripts we can increase this Max Supply value (We can't decrease this value)

So this can be another drawback for stake holders of the HE Tokens.


PM:- This is a false error, we can update Precisions only. Sorry about that!

 last year 

But by using json scripts we can increase this Max Supply value (We can't decrease this value)

You sure about this? I haven’t tested going over max supply as most tokens aren’t even close but that’s a big problem. Got the code that is able to do that?

Sorry my fault. I have dig & found it's extend of Precisions, not max Supply. Sorry for that false complain.

Honestly speaking this is a great educative. Am so glad to be part of this community. Thanks

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I am actually shocked to read that the maximum supply can be adjusted that easily without anyone's notice!!

I thought Hive Engine tribes were all following the normal crypto path like Bitcoin where the supply is fixed and can't be adjusted by anyone whereby everything runs on code.

Anyway I am not so technical to go deeper into this,hope the technical people here find and implement a solution

 last year 

Max supply cannot be adjusted. But new tokens can be printed outside of initial supply and in addition to the inflation specified by reward pool(s).

Thanks for the reply and clarification, this whole tokenmics things fuck me up hehehe...

wooooo, this is a tricky one. This sounds like it'll ensure more decentralization, but it will also make it harder for tokens to adapt and change to new situations like Hive can with the witness system. What if powered up stakeholders of the token had to hold a vote on all changes to the supply and inflation rate?

I had no idea. Excellent article. Very eye-opening.

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I have multiple long-short-term thoughts... not sure if I have enough material to talk about them, so I will refrain, but monitor conversations.

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In the little info I have I always thought that the limit of token issuance that was already established could not be altered in any way, but as you explain it, I see that it is not so. And the risks you are mentioning I think we should all be concerned about. I have a pittance of an investment but it worries me because I have high hopes for it.
Thank you for observing things like this but most of all for making them known to the users.

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very good education for me as a newbie

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I think this is a logical fix. @themarkymark

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The only question I have now @themarkymark is :

Could a tribe owner drain all the tribe power just like it happened to @theycallmedan in steem ?

That's the only thing I worry about now to decide what to do with my stake there !

 last year 

No, but the Hive Engine team could. A tribe owner doesn’t have any way to do something like that.

I was writing a post and I have an other related question as well :

Could the owner of the tribe restrict someone from claiming rewards ?

 last year (edited)

No, but the Hive Engine Team can potentially. Not easily though and highly unlikely.

If a user is muted, they will not get author, curation, or miner rewards. I believe any unclaimed but distributed rewards are untouchable and will be available to user. New posts and comments also will not show up in the tribe.

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I see. Something is wrong today in claming rewards anyway. I claimed 5 pob and I don't see them in my wallet. In the explorer this one : . I don't see any activity for 13 hours.

I'm claiming now 48 pob and I'm afraid that could be lost. Hive-engine seems have a problem I think. I don't know if that's happening in all tribes or only pob.

 last year (edited)

It is Hive Engine acting up. I let them know but haven’t heard back. There was a similar problem for a while weeks ago.

You won't lose it. Just takes a bunch of tries. It's overloaded.

Bookmarking for reading later, when I feel smarter

Very informative and eye-opening, thanks!

 last year (edited)Reveal Comment
 last year Reveal Comment
 last year 

You are in a unique situation where your max supply is exactly how many tokens you promise to print and will not be issuing tokens manually (hopefully).

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Well i'm sure the pob project may have some legit participants in it and i found some of you around here questionable at best and it seems to be a hierarchy of you here that could easily collude. Vitalik has sounded off on your project here as not what he'd term decentralization. Whether you're talking about 20 witnesses or 100.. some of us in this space recognize those situations as a security risk.. although "some of you" may be trusted by certain community members you all form conclaves with. Most in crypto don't recognize this type approach as decentralization. The problem is that anyone is in the position to make changes we don't want at all.

I do think though that opens up a bigger topic of what decentralization is. I think it's a myth at best. I categorize decentralizion in several categories all in which you all fail. The first one is decentralization of developers next miners, exchanges.. and wealth.

Let's break it down so you all understand just how far off you are. developers.. funded developers vs unfunded or just same groups of developers if they dominate a project or network thats not decentralization. You seem to be in everything marky mark but not just picking on you guys this is also a problem in bitcoin.

Miners Vitalik doesn't like the idea you all got the 20 witnesses he doesn't feel that satisfies decentralization and i rather agree with him. exchanges.. At this stage we use centralized exchanges at a rate of 95%. Last is wealth. .we know money runs this place you often times brag about it lol.. So i dont think we have to state the obvious about the decentralization of wealth lol.

I do make one other clarification and correction.. The categories i used weren't made up by me. it was created by a world reknown economist by the name of Roubini and that's how he decentralizes networks. Now many in crypto see him as not someone they favor however i find truth often times comes first from your biggest critics.

The issue of lack of decentralization in these hive projects are complex ones and ones i don't think will be solved because i believe decentralization is a myth.. However.. if i had to pick one system to use.

it would be more like the beginning of electroneum. They found the solution was in allowing charities to mine the coins to decentralize the network. They called this the (POR), Proof of Responsibility algo. Now it is obviously very possible for a collection of charities to steal and to be corrupt and not trustworthy lol.

However in a space that depends alot on trust of the teams that create and run projects to a great degree it makes sense. Unfortunately the levels of greed and crony capitalistic like methods and levels you all willing to go in this space i'd find it hard to trust any of you.

I guess i occupy a unique space being a ubi project who gives the network to the people. Sure people could believe i'm out to scam them but its kinda hard for ubi projects to do that successfully seeing that they are giving away the network and all lol. So some go well ubi projects won't make any money well.. there is something funny in a currency and i'll let you in on a little secret. Currencies have the same value at $1 that they have at $1 million lol. .I'm going ot let you figure out what little puzzle of why that is lol.

Your systems are imploding and you sitll not listening. We know that though because we've seen what not listening has got us at the rank of a 200 place coin .. good job. UBI projects sound alot like those charitable organizations that mine tokens under the proof of responsibility model. Afterall who would believe a charity thats not a for profit business like your projects are.. would steal from the people.. I find that hard to believe marky mark .. haha....

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 last year 

What rank is bitcoinmyk?

I got a better question for you mr smarty pants.. since we've seen where your smarts have got hive. Which project has the best chance of getting 100 million users? I'll let you sit on that lol

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 last year 

Not Bitcoinmyk, what’s that have 2?

You're funny Marky Mark and you think you're going to embarrass me..You're wrong its going to backfire.. I want you to look at the comment section of this video about bitcoin myk.. I want you to count every wallet you can see in the comment section... then i want you to return and ask me that question again sir lol.

You're dealing with something you don't understand.... but you will

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 last year 

Nah, I’m good.

 last year Reveal Comment
 last year 

I agree but your tribe is also in a unique position. Other tribe owners can issue and won’t likely be noticed as there is so much noise. It would be very easy to spot a pob issuance outside of reward pool.

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There is a way for proofofbrainio to make it so he can't issue any more coins, an option no one I've seen has mentioned yet...that is to delete your passwords from your computer/system so that it is a "lost account." In this way, no one will ever be able to issue new tokens...again, you'd have to trust the person saying they deleted the info.

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 last year 

The password is still available to ScotBot and the Hive Engine team as they use it to issue the reward pool.

There is as much trust that someone that someone truly deleted the keys (impossible to confirm) as there is hoping they won’t print more tokens to their own benefit.

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There's always poison...wait...that might not work either...