On January 6, 2012, J. R. Willett published version 0.1 of a whitepaper that he entitled “The Second Bitcoin Whitepaper.” In the whitepaper, he proposed that the existing Bitcoin network could be used as a layer on top of which applications could be built. (A common analogy used to describe Mastercoin’s relation to Bitcoin is that of HTTP to TCP/IP: HTTP is the application layer to the more fundamental transport and internet layer of TCP/IP.) Such applications would include the issuance of new currencies that do not require their own blockchain and the creation of smart contracts. On July 31, 2013, version 0.2 of the Mastercoin whitepaper was released as the Mastercoin Specification and included a call for the funding of the Master Protocol project. On September 9, 2013, version 0.3 of the Mastercoin specification was released to include the feature of smart property. On November 11, 2013, version 0.3.5 of the Mastercoin specification was released and introduced spending limits for savings wallets, contracts for difference bets and the use of “Provably Prune-able Outputs” as a method to store data on the Bitcoin blockchain.
In order to fund the initial development of the Master Protocol, a Bitcoin “Exodus Address” was created. Anyone who sent bitcoins to this address between August 1 and August 31, 2013, was able to receive 100 Mastercoins (MSC) per Bitcoin sent. Also, additional MSC were sent to the sender of the bitcoins depending on the week during which the bitcoins were sent—the earlier one sent bitcoins the more additional MSC that person received. With this process 563,162.4 MSC were generated by August 31, 2013. In addition, 56,316.2 development MSC were generated in order to fund the continuous development of the protocol. The number of development MSC corresponds to 10% of the 563,162.4 MSC that were generated during the funding phase. Of the 56,316.2 development MSC, 50% would be spent between September 1, 2013 and August 31, 2014, 25% would be spent between September 1, 2014 and August 31, 2015 etc. The schedule for the release and the spending of the development MSC for the first seven years of the project is given below:
|Period||Available development MSC|
|September 1, 2013 – August 31, 2014||28,158.12|
|September 1, 2014 – August 31, 2015||14,079.06|
|September 1, 2015 – August 31, 2016||7,039.53|
|September 1, 2016 – August 31, 2017||3,519.76|
|September 1, 2017 – August 31, 2018||1,759.88|
|September 1, 2018 – August 31, 2019||879.94|
|September 1, 2019 – August 31, 2020||439.97|
There are therefore 619,478.6 MSC and no more MSC will ever be created. The total number of MSC in existence equals the sum of the originally distributed MSC and the development MSC.