When we created Merit, we set out to create a system that is more decentralized and fair than other digital currencies. With traditional cryptocurrencies, both the power and the money flows into the hands of the miners as well as the mining pools. This struck us as relatively curious, given that the primary ethos of cryptocurrency is decentralization and the elimination of a reliance on a trusted third-party.
Merit is the world’s first invite-only cryptocurrency, and it rewards not just one type of user (miners), but it also those who work to introduce new people to the Merit community: ambassadors. We believe that everyone should be included in the set of benefits that digital currencies bring to the world. Further, for cryptocurrency to truly make a dent in the broader world of finance, people should be rewarded for bringing others into the community and helping them learn what this world should be about.
This is why we created proof-of-growth (PoG) – a decentralized lottery that rewards the Ambassadors of Merit. We call these rewards Growth Rewards, and users can earn these growth rewards alongside classic mining rewards.
When we came out of beta in May (only three months ago!), we immediately began work on the next iteration of PoG. We knew that we were introducing a lot of new concepts on the blockchain, and that we would need to iterate them and enhance them as time went on. We also believed that only real world data would show us how the algorithm would influence the behavior of users.
Just weeks after launch, we had thousands of Wallets on the Merit network. While we were proud of the results, we knew that there were significant opportunities for improvement. And our awesome community was there every step of the way to give us feedback and guidance. The most common challenges we heard about were as follows:
So we worked to address these things in our second version of the PoG algorithm, now known as PoG2. We did extensive research, math modeling, and simulations. After months of testing, iterating, and simulating, we launched PoG2 on August 17th, 2018. After only 12 days of being live, the benefits of PoG2 are clear. Quite honestly, they are beyond our most significant expectations.
The graph above shows the differences in the number of Ambassadors winning growth rewards for the 12-day period before it launched and the 12-period after it launched. Before PoG2, 197 people won more than 1 MRT during this 12-day period. The week after PoG2 went into effect, over 3115 people won more than 1 MRT! This is an increase of over ten times the number of winners. PoG2 allows many more people to experience the value Merit brings, that there is a chance to win without having to be in the top 100.
While winning 1 MRT is significant, it may not be enough motivation to change the behavior of all users. So let’s look at the number of people that won more than 100 MRT. Here we’ll see that PoG2 has similar advantages over PoG1.
Only 57 people won more than 100 MRT the week before PoG2. A week after PoG2, 193 people won. Almost three times as many people earned more than 100 MRT in a week. What this means is that if you break the top 100, you will earn more than 100 MRT a week.
PoG2 has a clear advantage in ensuring that more users are rewarded and that newcomers can earn rewards as well. Another lens we can use to evaluate this is the average network size of the winners. Here we see that many more members of the community are included.
The average network size to win 1 MRT or more with PoG2 is only 27 compared to 269. People who grew the network modestly will get rewarded for their efforts, instead of just the top Ambassadors. We wanted more people to feel the magic moment of earning Merit for growing the community much sooner in their tenure with us, and PoG2 is a dramatic improvement in that regard.
The most important question in all of this is: did changing the incentives fundamentally impact community behavior? While we were, of course, hopeful that it would – we weren’t totally sure.
That is, until now.
In the 12-days leading up to the launch of PoG2, the community grew by 391 wallets. At the end of the 12-day period after PoG2 launched, the community grew by more than 2932 wallets.
The early data around PoG2 is quite compelling. The graph below shows the total number of wallets in the Merit community. Can you guess when exactly PoG2 went live?
We, as a team, believe in intuition and instinct. These things are even stronger when they are backed by data. PoG2, for us, has been a very heartening example of when our instincts led to better software, and where the data has shown us that we’re on the right track. The Merit team will keep on innovating, and we will continue our relentless pursuit to become the easiest and most used digital currency in the world.
Upward and onward!