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.
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.
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.
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.
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.
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.
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.