Welcome to my lair, XENian, and congratulations on winning the Orb!

This was a great first question, it had me thinking for days.

You have a couple of different options, challenges in bold:

• You can airdrop to an existing cryptographic data set (holders of BTC, ETH excl. ICO-funded wallets, etc.) but this likely provides tokens to a “larger” user base than your specific community, and a lot of those users will be natural sellers of your tokens. Allowing recipients to claim their airdrop within a limited timespan helps to restrict the airdrop to users who are at least paying attention to your project (this is what HEX did).
• You can run a token sale but this likely makes your token a security and your token sale illegal in most jurisdictions if you don’t restrict the token sale to accredited investors. In the case of illegal ICOs, it’s important to make sure that your model doesn’t allow for the recycling of capital (this is one of the flaws with the way EOS and HEX did it).
• Proof-of-Work mining, but well-capitalized players who want to make a bet on your coin will spend significant resources on building optimized mining facilities that will likely absorb most of the supply into the hands of VCs anyway, see for example fair launch attempts such as Grin.
• Proof-of-Burn. There are historic examples of this, such as Counterparty (XCP) which was distributed in this fashion. XEN is an ongoing variant, which burns gas. There is no specific challenge to this—because you’re not taking investments from people, the risk of regulatory issues is low. The challenge more has to do with the fact that the number of users who are willing to participate in schemes where their funds are burnt instead of going to fund developers to build the project is relatively low, and you will still end up with a “niche” community of holders as well as limited resources to make their sacrifice worthwhile.

A general challenge is that if you issue most of the supply in the initial months or years, then the majority of supply will inevitably fall into the hands of an early community (“insiders” in some people’s eyes). If you on the other hand choose to issue most of the supply later, your project is going to have high inflation, and it will scare away potential investors/community members.

I’d also note that it’s almost impossible to keep VCs out, even if they don’t get an initial allocation. VCs buy coins on the secondary market in large proportions, and they specialize in finding these projects before retail users. Interestingly, projects like HEX have been successful at keeping VCs out by giving off all kinds of warning signals as a project (basically, in the same way Nigeria letters are designed to only attract the gullible and low-educated by having typos in them, HEX scares off all kinds of centralized exchanges, custody solutions and VCs by looking like a scam). Maybe trying extra hard to seem like a total scam is the right play? And then I mean really trying hard. LUNA-level ponzi vibes are not enough! You gotta really up those ponzi vibes through the roof! Not the fancy ponzi, trailer trash ponzi is the way to go.

Sidenote: If Richard Heart burned the OA supply (his own wallets) in HEX, he’d actually have been quite successful at A) airdropping to BTC users, B) running an illegal ICO for non-accredited investors such that retail can participate, C) giving off all sorts of warning signals (such as having a 90% centralized supply) making sure that HEX has stayed out of CEXes, custodians and funds.

Many exchanges and custody solutions use checklists which prevent them from onboarding a coin with extreme supply concentration. You can leverage that to your advantage—centralize the supply massively for the initial years, and then burn it! (This is a joke, but is it stupid if it works?)

For a “fair distribution” marketing pitch to work, maybe it doesn’t really matter for you if VCs buy the coin on the secondary market though? Your question does seem to focus on the initial allocation. I’d say that XEN is probably doing a good job at keeping the VCs out just by virtue of the fact that ex-Hexican Bitconnect-stars like Trevon are heavily involved with it.

Since I know that you’re heavily involved in XEN, I read the XEN litepaper. I’m assuming that this question has to do with the X1-chain and the distribution of the XN-tokens. I’m guessing that you’re likely contemplating a proof-of-burn scheme of XEN to distribute XN-tokens.

The factor I’d be looking at here would be how long of a period you allow a burn scheme to run for. Counterparty (XCP) only had their burn period open for a month. Think about whether XCP is really more fairly distributed than ETH (which had an ICO), even though XCP used a proof-of-burn scheme, when the window was that small. XCP failed to get traction (it had no funding!) and it had a rather limited initial distribution, even though the mechanism was technically fair.

While I like the undertaking ideologically, running a competitive smart contract network without funding is going to be challenging. Remember that people would be burning tokens of real economic value, placing the faith with a team with no funding. I respect the ambition though.

Lastly, a note on foundations: Even though you mentioned you specifically want to avoid them, I think this is worthwhile mentioning. You can set up a not-for-profit foundation with the responsibility of giving out some portion of your tokens through a series of different airdrops, grants and developer partnerships but this puts the control of the issuance in the hands of a centralized entity. However, If you look at for example Arbitrum, they have tried to localize power over the Arbitrum Foundation to an initial set of airdrop users, such that the foundation has a legal duty to observe the requests of decentralized governance (the airdrop recipients have the power to elect or remove Arbitrum Foundation board members, for instance). Ultimately that process also requires a functional legal system and the word of law to enforce rules.