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Bitcoin.com's Clarifications on the Miner Development Fund

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1 year ago

The recent Bitcoin Cash miner development funding plan announcement created a lot of justified discussion, questions, concerns, and confusion amongst members of the community.

This article is going to answer some of those questions and address any of the concerns or misunderstandings that people might still have about the plan.

Still in the works

It’s important to understand that the plan proposed by Jiang Zhuoer is still very much in development. Zhuoer himself made this clear in his Reddit AMA, although the original article certainly lent itself to some confusion. 

Questions like who makes decisions about the implementation of the proposal, who manages the distribution of funds, who is in charge of the Hong Kong corporation, is the corporation even necessary, what kinds of work is funded, who will receive funding, how to track success, how to ensure we avoid the kinds of problems with collective funding pools that make the non-profit model often inefficient, and how to maintain proper incentives are all important things to discuss and the community should take an active role in thinking about these things.

And many more of the questions proposed online are well taken and the answers are still being worked out by the miners. The proposed changes would not go into effect until May 2020 and there is still plenty of time to work out answers to those questions in a way that satisfies as many parties as possible.

This is not the end of the discussion, it is the beginning. We know the miners are committed to continuing to develop Bitcoin Cash as fast, cheap and reliable digital cash for the entire world, and if you want to see this too, keep making your voice heard so that they have all the information they need.

It is not a tax

Many members of the Bitcoin community jumped to Twitter and Reddit to call this proposal a coercive tax on miners that fundamentally changes Bitcoin Cash. There are several reasons this is misguided.

  • A tax is a coercive instrument by state actors which must be paid under threat of legal penalty, including fines and jail time. Under this proposal, no such threat exists. Bitcoin.com stands behind peaceful, free market activity and voluntary associations. This proposal is made in accordance with those principles and we will continue to support it so long as it remains that way.

  • It is more accurate to call this proposal a service fee for the miners, which has both wide contemporary and historical precedent in the market outside of Bitcoin. Bitcoin itself is a free market governed by majority hash rate, and honest majority miners are under no moral, legal, or protocol obligation to accept blocks from minority miners if they cannot agree on proper terms of doing business together. This is the free market at work, and we believe Bitcoin cannot work any other way.

  • It is even more accurate to place all of this within the context of the hash rate dynamics and difficulty adjustments between the various major Bitcoin chains. While it may seem like a proposal for an added fee that means more costs for Bitcoin Cash miners, in practice, the majority of the funds will not come through as an additional cost for existing Bitcoin Cash miners. The costs will be shared across the entire SHA256, which means much of it will be paid for by BTC miners and through the minor decrease in hash rate on Bitcoin Cash. What matters most is the real cost born by Bitcoin Cash miners, which will be negligible, not the cost that looks immediately apparent in the article.

It is very important that the economic incentives in Bitcoin remain preserved and this proposal does not alter those in a way that a real tax might. 

It is temporary and reversible

The proposal does not call for a fund for development in perpetuity. It is a temporary plan with a six-month runway that will not result in protocol changes that could cause chain splits. Miners may choose to end the fund at any time if the majority of hash decides against it because it is inefficient, unworkable, or otherwise unfavorable to Bitcoin Cash or their businesses.

The genius of Bitcoin as an economic system requires that we don’t rush to make changes that might break that system, and a built-in developer funding model in perpetuity seems both rash and economically dangerous.

This new proposal gives the Bitcoin Cash industry an opportunity to experiment with one possible way to solve the problems in funding important infrastructure that will allow Bitcoin Cash to continue growing as cash for the world.

We’re very optimistic it will work once the final details are worked out.

Professionalizing Bitcoin Cash

Bitcoin Cash cannot continue to grow unless developers and miners find an effective and mutually profitable way to develop the underlying protocol infrastructure necessary for a fully scaled peer-to-peer digital cash system. 

There have been many debates over the last several months and more about what this needs to look like. While debates take place, important work has been left undone that is limiting the potential of Bitcoin Cash to facilitate more commerce, more users, and more enterprise use cases.

It is time we find a solution, even if it is imperfect, so that Bitcoin Cash can get on with the important business of scaling and developing more on-chain utility. As with any imperfect solution, not everyone will be happy, but we believe as long as the economics of the protocol remain solid, we need to push forward.

This step is one among hopefully many that will begin in 2020 to prepare Bitcoin Cash for global adoption, and miners are taking an executive role in this process and showing their commitment to making this happen.

A word about the Hong Kong corporation. Various proposals are on the table for how to properly manage the fund and we need to consider those proposals while also taking into account the various pitfalls and negative incentives that often plague collective community funds.

Ultimately, it is miner money since they invest the capital to earn those rewards, and decision-making about the funds should be close to the people who pay the highest opportunity costs for their distribution. Money is always better spent that way.

Thinking long-term

Some have commented to express concern that not enough discussion has taken place with the broader community about this proposal. Certainly more discussions about the specific proposal need to be had and they are being had, but we also need to begin thinking long term about the best way to decide questions like this. 

There are going to be some largely unavoidable growing pains in Bitcoin Cash as we transition out of a smaller niche community and into the broader world. The way decision-making has been handled in the past may not work at a larger scale, and as a community, we need to be prepared to adapt even if the process makes us uncomfortable in the short term.

Spaces like Reddit, Twitter and Telegram are valuable discussion and information distribution platforms, but they are also prone to drama and social manipulation, and they can produce an overabundance of noise that distracts from getting important work done in Bitcoin Cash. 

Likewise, while the expectation of lengthy, community-wide public discussions might be good in a niche community, they break down at scale, and we need to begin preparing now for the next stage of Bitcoin Cash, which should continue the spirit of censorship-free open discussion in Bitcoin Cash while also recognizing the needs that businesses in the industry have to prioritize their growth.

Bitcoin Cash must grow beyond a community and into a true free market. In a free-market, it is not always possible, efficient or necessary to engage in lengthy dialogue with every possible player in the space, and indeed markets work best when individuals pursue their peaceful, voluntary interests.

Miners getting more involved directly through hash power governance is a good first step to moving Bitcoin Cash into the real world and should help drown out some of the noise and back and forth while we continue to discover the best mechanisms for decision-making and developer funding at scale.

Making Bitcoin Cash fast, cheap and reliable for the world!

In short, we are excited about the basic idea of the proposal and we hope the Bitcoin Cash community can be as well. 

While the specific proposal is imperfect and needs to be further developed and perhaps amended, miner funded development is a strong signal that Bitcoin Cash is on the serious path towards global adoption and that miners are investing for the long term in the ecosystem.

Let's keep focused on the important work of making Bitcoin Cash fast, cheap, and reliable digital cash for the entire world.

- Bitcoin.com




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Comments

Very nice article

$ 0.00
1 year ago

Thank you for shedding light on the questions. The dark coast is now cleared. I believed it will help BCH ecosystem grow eventually.

$ 0.00
1 year ago

"It's not a tax" they say - but it is a tax. As the proposal stands, it's a fee defined by a congress of current incumbents (the current "state" of things), for which we might reword as: "this is a compulsory fee, with no foreseeable end date imposed by the current state". If this were to happen it would not be good for Bitcoin. Far better for Bitcoin developers to make their donation addresses available and let the economics of that take its course.

$ 5.01
1 year ago

1.) It is a tax. As proposed it's an involuntary cut to all miner rewards, which would make BCH even less competitive as it is now.

2.) You should withdraw from schemes likes this to save face not double down on your bad decisions, like the BSCore cabal did

3.) If you or other businesses want to help the protocol then fund it transparently, but leave the rules of the protocol out of it.

$ 0.00
1 year ago

Well said!

$ 0.01
1 year ago

Call it licensing or tipping?

$ 0.00
1 year ago

Thanks Roger and the Bitcoin.com staff for taking the time to clarify the discussion with the miners and other interested parties. This logic is quite a bit more compelling than the initial feedback, and I think helpful for the silent majority of BCH supporters (like myself) who are less active on the social media platforms, but are following development while also using and holding BCH with a long-term view.

I think the fundamentals and nuance make a lot of sense, but are hamstrung by the optics of the easily memeable "12.5% tax" - which we will have to be vigilant about resisting via education, while also not sounding like we've drank the Kool-Aid. The initial BCH underperformance vs. BTC is also an important market reaction signal we as clear Austrians should NOT ignore, though posts like this do help reassure that the proposal proponents are not just unilaterally avoiding responding to legitimate criticisms.

$ 0.00
1 year ago

I think if this is truly voluntarism, there shouldn't be any penalization to miners that don't want to abide by this fee. If pools want to pay it fine, but if an individual miner can't afford it or just don't want to, it shouldn't be penalized, that's how voluntarism works.

Historically processing blocks or rather avoid processing blocks have been done to 'bad actors', certainly we could relabel to criminals, dissidents, rebels, or just minorities. This is way to a philosophical prosecution where members are treated as second class citizen because of their believes.

On other side of the discussion, a number has been thrown to be a goal at 6 million USD or 17142.85 BCH at current market price. BCH has a current capitalization of 5 Billion USD and a daily volume of 3.3 M. I think this bad publicity could cost BCH multiples in Market Cap than just have the team raise that capital. I understand donations have been launched before with mixed results.

BCH for the longest have been working on SLP for tokens and the ability to produce Smart Contracts similar to Ethereum ERC20 tokens. At the moment the ethereum network is launching consistently entities through ICO that reach many times that 6M number every month. A good site to see this is on icodrops.com where you can see their targets being successful.

If we go by this measure, I could think that an ICO by the core team could represent easily 100M USD if not more. Of course SLP hasn't capitalize much attention like other token ecosystems like Tron or Waves or EOS, but still enough in my opinion to have investors buy these tokens on the DEX market.

So why force miners through all this pain and the community through all this bad PR attempting to mask something that can easily been taken on a negative way and instead support an open ICO and raise that capital and validate the work that has been put into BCH for the past 2 years. This also have the benefit that having core raise their capital, they will be free to dispose with more liberty than if its being handled by a third party to report to.

This IMO provides way more benefits:

  • Independence from a possible handler of the Core team
  • Prove the power of SLP
  • Increase attention of the Token marketplace
  • Possibility of a secondary or 3rdciary ICO in the future
$ 30.24
User's avatar JZA
1 year ago

It is voluntary. If the majority of miners choose not to do business with you then you can not force them to do business with you.

$ 0.00
1 year ago

Honestly that sounds like shutting your water because the government doesnt want to work with you, and they are free to do so.

$ 0.00
User's avatar JZA
1 year ago

So you produce a block. Should I be forced to receive it if I don't want it? Is it your right to force it on me? What if you're producing running shoes instead of blocks. Is it coercion against you if no one will buy your shoes? Do you believe in freedom of association?

$ 0.00
1 year ago

Key here is 'why you dont want it'. I mean thats the principle of censorship. Governments dont want your speech, they censor you, because is not based on their capacity out of free will, this is active collusion against someone because of political reasons. You can argue that avoid hiring minorities is completely okay because a) freedom of association + b) freedom to choose.

$ 0.00
User's avatar JZA
1 year ago

Key here is 'why you dont want it'.

So you're into thought crimes?

$ 0.00
1 year ago

Also known as motives.

$ 0.00
User's avatar JZA
1 year ago

Thanks for this clarification. My suggestion is to stick to the following principle:

No user-activated soft forks for highly controversial decisions that were never on the roadmap. Non-mining users will consider blocks valid regardless of whether the donation is present. If some miners wish to experiment with stronger requirements on block validity, they can, but they should not push for non-mining users to fight alongside them. Node developers should ensure that default node configuration is neutral.

The only way to avoid splitting the community is to not drag non-mining users into this fight. The cited tragedy of the commons occurs only between miners, and any attempted solution should thus only involve miners as well.

$ 11.51
1 year ago

We're 100% behind this. Yes, the implementation details could use some work and there's obviously concern about how the funds would be allocated but Bitcoin Cash needs this.

The fintech industry is doing everything in their power to bypass Bitcoin. We blew our chance at catching them off guard with our first attempt (BTC). If we don't step up and do what's necessary, they will succeed in ensuring that all the work this community has done to get Bitcoin to where it is today is wasted.

Getting BTC miners to pay for most of the cost is genius and we believe the security cost is worth it. Bitcoin Cash needs to become the majority chain and these are the kinds of moves we need to be making if we're to stand a chance.

$ 0.62
1 year ago

And if the BTC miners stop mining BCH?

$ 0.00
1 year ago

we believe the security cost is worth it.

given that BCH hashrate is only at 3% of BTC, I would tend to agree with that statement

$ 0.00
1 year ago