Those of you who have been following Hedera on our journey know that we expect to open the mainnet for public use later this summer. With this, our goal is to make the Hedera cryptocurrency, the HBAR, widely available for people to use for development and usage of applications on the network as it grows. Hbars also play a key role in securing our path to decentralization, as I will outline more below.

Hbar release schedule, and its role in the secure path to decentralization

We believe there are several key requirements along a secure path to broad and continued decentralization -- decentralized governance, permissionless nodes, and currency distribution. Decentralized governance is covered in detail in other documentation [https://www.hedera.com/council]. Here I will focus on permissionless nodes and currency distribution, and the role they play in securely achieving and maintaining decentralization of the Hedera network.

A permissioned network means that a person or entity must have permission to run a node. A permissionless network is one In which anyone can run nodes and do so anonymously. A public network can also start as permissioned and transition to permissionless. Hedera’s path to decentralization starts with a handful of permissioned nodes, which will grow over time. Further down the path, we will relax the requirements on who will be given permission to run a node, and eventually Hedera will be permissionless, allowing anyone to run a node. This has always been the end goal of Hedera’s roadmap -- to be fully decentralized with anonymous nodes.

In addition, for continued decentralization, Hedera also needs widely distributed coins. Coins are the "stake" in a proof-of-stake network. Nodes vote on approving transactions and what order to put them in, and each node's vote is weighted by the amount of "stake" it has. For distributed consensus, you need distributed stake, and therefore distributed coins. To achieve consensus, nodes representing more than 2/3 of the stake must agree on the order of transactions. The hbars need to be widely distributed and with enough value that it becomes practically impossible for a would-be attacker to buy or control 1/3 of the stake.

Hedera will use a combination of a ‘path to permissionless’ and a ‘path to broad coin distribution’ to keep the network secure while continuing to decentralize.

First, the Hedera Governing Council will oversee the schedule for moving from permissioned to permissionless nodes hosting the network. In a permissioned network, steps can be taken to ensure that the voting weight of the permissioned nodes is evenly distributed. Coin concentration is irrelevant with permissioned nodes, because the nodes can be capped at how much can be staked to a node. For the security of the network, it can remain permissioned until coins are widely distributed and the total value of all the circulating coins is high enough as to be too expensive to buy a third of them in order to conduct an attack.

Second, Hedera has a long, steady release schedule for its hbar coins. The initial release of hbars at Open Access will be only 3.18% of the total supply of 50 billion coins, for a total of ~1.59bn coins. By the end of 2019, only 7.53% of hbars is expected to be released, and no more than 33% of hbars are expected to be released until the middle of 2023. After 2023, we expect that it will be another 10 years before all hbars are gradually released out of the Hedera Treasury and into circulation.

This slow release schedule is intended to provide for the stable and orderly growth of the platform so that it can reach scale without sacrificing security of the network. It is also tailored to match projected user needs to discourage coin-related speculation. In addition, by publicly communicating the expected release schedule and requiring any material changes to be implemented through the vote of a diverse set of Council members, Hedera seeks to provide transparency and predictability about the total circulating coin supply in order to further dampen speculation, minimize information asymmetry, and protect against market manipulation.

Co-founder release schedule

At Open Access later this summer, Hedera will make the initial distribution of hbars to SAFT holders, employees, advisors, and vendors.

As we look at what is happening in the market and evaluate our expected rate of network adoption and growth, we believe that an orderly release of the coins is crucial. In addition, the SEC published a framework this spring that indicated coins should be released at a rate that is roughly commensurate with network usage. We have made it our goal to be consistent with this framework by the SEC.

As mentioned above, the initial release of hbars at Open Access will be only 3.18% of the total supply of coins. The hbars under the SAFTs and agreements with employees, advisors, and vendors will be distributed over varying periods of time up to six years after Open Access, with the co-founders and other early senior executive employees having the longest distribution schedules.

Leemon and I believe it is very important to demonstrate to the market our commitment to Hedera, our belief in our mission, and our long-term goal of building a platform that will stand the test of time. As such, none of the hbars we are receiving as compensation (employee grants) will be released before January 1, 2020. While we both own SAFTs and will receive some hbars under them, we are also further delaying the release of 76% of all of our hbars (whether from our SAFTs or employee grants) until after August 2023 -- which is after the fifth anniversary of mainnet launch. Other early senior executives currently on staff have also agreed that none of the hbars they receive through employee grants will be released before January 1, 2020, and that a substantial portion of their total hbars will be further delayed until after August 2023.

In addition, our early SAFT holders have agreed to amend their release schedules, which provides for the vast majority of coins to be released on a frequent basis (between daily and monthly) over the course of 3-4 years. Instead of 40% of their tokens being released on Day 1 (based on the original coin distribution schedule), early SAFT holders will now receive only up to 10% of their tokens in the first week. The remainder will be stretched out evenly over 36 to 48 months on a regular basis, with no balloon payments.

We are excited to be working towards Open Access, and to very soon be able to share with everyone in the world the power of Hedera. Thank you for joining us on this journey.

For more information on Hedera’s path to a sustainably decentralized network, watch this webinar by Dr. Leemon Baird.