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The IFP: Part 2

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Avatar for Cain
Written by   604
3 months ago

Wednesday, October 7th, 2020, 38 days before the fork

In Part One of this series, I wrote about the IFP as a symbol, but now I want to discuss it in more practical terms. Specifically, why I think it will work, why I'm not worried about it killing Bitcoin Cash, and why it would be an utter failure if we didn't try it.

First, I want to focus on why I think the IFP will work.

It's widely agreed that there are essentially three different ways to fund development on Bitcoin. One is with donations or sponsorships, a second is from businesses that might profit from using Bitcoin, and the third is to put it in the consensus layer and charge miners to pay for development with a portion of the coinbase reward.

I think it's fair to say we tried the first option with Bitcoin Core, which eventually led to the second option when Blockstream entered the picture, which now leads us to hopefully trying option three this November 15th.

I understand people are having a difficult time accepting the IFP. It's a radical change, but one that I am confident will also seem obvious in hindsight. I know that many believe a donation model can work. You're encouraged by all the flipstarters that have been funded and how the community seems to have united in opposition to the IFP. But with all due respect, I think you're not seeing things clearly.

Since its inception, BTC has risen astronomically in value. Early investors made enormous amounts of money, and still the donation model proved inadequate and the network was taken over by those willing to pay core developers to do what they wanted rather than what was necessarily best for the network. Maybe if Satoshi had stuck around and used some of his coins to fund development things may have turned out differently, but as far as anyone knows, that ship has sailed.

For those of you that think the flipstarter model is sustainable, I want you to consider that in the past six months, flipstarter campaigns have raised a little north of one million dollars, but that's still at least an order of magnitude less than what is needed to realistically compete with all the other projects trying to become digital cash.

Making matters worse is the fact that all that flipstarter money has been distributed amongst so many different projects it will only be a matter of time before most of them are asking for more. This is the dark side of decentralization.

I applaud the people who have made and continue to make large donations in support of the Bitcoin Cash projects they believe in, but I don't think it's fair or appropriate that the entire ecosystem relies on the generosity of a handful of prominent BCH actors. In the Spring of 2021, will Roger and Marc be there to hand out thousands more BCH to projects that are unable to monetize their business? Can these donors be trusted not to steer the project in a direction that only benefits them?

Maybe you're thinking if number goes up I'll be happy to donate again. But what makes you think the work of BCHN, Knuth, BU, Flowee will make number go up? These are all the same people who have been around since the beginning of BCH, the same people who have contributed little to nothing for three years, and only now because of the IFP have suddenly found the motivation to do some work. Where were they before the IFP?

I know those of you who oppose Bitcoin ABC argue the same can be said of them. But I think a deeper look would reveal they have done a remarkable job considering the circumstances. They not only started Bitcoin Cash but they have been admirable stewards of this project since day one. They have protected it from befalling the same problems that plagued the previous attempts at a big block version of Bitcoin.

For BTC, the halving has come and gone, the lightning network is still 18 months away, and who knows if the institutions will ever come. Simply put, BTC is out of catalysts, but the same isn't true for BCH.

To me the IFP could be the catalyst for a whole new era of Bitcoin. Imagine seeing those first blocks mined with 8% of the coinbase reward being diverted to ABC's address marking the beginning of the Global Network Council. To me this isn't like the hash war of 2018 because it doesn't matter who has majority hash. So long as there are miners using ABC's code, a version of Bitcoin Cash that favors those who seek profits will continue to live on.

This is why I believe the IFP will work.

BCH doesn't currently have enough funding for infrastructure development. The IFP offers a solution. For the first time, Bitcoin Cash developers will be paid directly out of the coinbase reward to perform work. For the first time they will be directly incentivized to make the value of the coin go up.

This is different from simply buying some coins and hodling them. This is incentives on steroids. Most people like me go to work to earn a paycheck, but the difference here is that these developers are going to be paid in BCH, and the better job they do, the more their BCH will be worth. It's like giving an executive a bunch of stock options in a company, except these options are handed out every ten minutes and your job performance is going to be scrutinized every six months to make sure you're worth the expense.

Working for donations is completely different from charging for your services. Who wants to sit there and have to convince people you deserve their handouts when in fact you might deserve much more. Who decides to choose a career path or start a business where you can't charge people for the work you do but only ask for donations. Imagine a restaurant where people go because the food is great but payment is optional. Sure some people will feel obligated to pay some nominal amount, and a few rich people might even overpay just so they can feel like big shots, but I guarantee you no matter what, it won't be enough as there will certainly be more people who want a free lunch than those who don't, and in time the restaurant will be forced to close.

I view the incentives offered by the IFP as more than just money. It's an opportunity to create goodwill between the miners and the developers and have them work symbiotically to deliver a better product.

Bitcoin Cash isn't just about computer science, economics, and cryptography. It's also about people. BCH needs people who are both talented and passionate to build the network as much as it needs miners to secure it, and what better way to attract and retain those people other than signaling to them how much this ecosystem values their work. Do we really expect a 10x software engineer to want to work on BCH so he can at some point ask the community for a handout?

I believe the incentive mechanism of the IFP will act as the motive force that's been missing in Bitcoin Cash all these years. The fact that the 8% will really be paid for by all sha256 miners is only the cherry on top. In fact, I'm hopeful that the IFP will even help the Bitcoin Cash network in another unexpected way.

Recently we've seen a significant number of blocks being mined by an unknown miner that include no transactions other than the coinbase reward. It's like having no block at all since no other transactions get confirmed. I don't know if this an attack, but what I do know is that the miner with "Hath" in their coinbase text will now be less incentivized to mine BCH once the IFP kicks in and their empty blocks will at least be contributing to infrastructure development.

Charlie Munger is quoted as saying: "Show me the incentives, and I will show you the outcome."

For me, I see the IFP as incentivizing Bitcoin Cash protocol developers to produce an outcome where BCH becomes the best money the world has ever seen.

That is the Bitcoin Cash mission, to be money for the world and enable a truly free market economy.

To me, keeping a project alive through donations is a form of altruism, but growing a project by profiting off your work? That's free market capitalism at work.

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*a previous version of this article incorrectly credited the Charlie Munger quote to Amaury Sechet.

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Avatar for Cain
Written by   604
3 months ago
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Comments

but what I do know is that the miner with "Hath" in their coinbase text will now be less incentivized to mine BCH once the IFP kicks in

This moves hashrate, and by extension security, to competing chains.

$ 0.00
3 months ago

Do we really expect a 10x software engineer to want to work on BCH so he can at some point ask the community for a handout?

I expect such an engineer to demonstrate value and then let those who benefit from that value act on their incentives.

Failure to demonstrate the value is expressed through lack of liquidity willing to invest.

$ 0.00
3 months ago

And to me ABC has demonstrated value for the past three years.

$ 0.00
3 months ago

I believe the value they provided early on was highly important, but I'm not convinced the net value the last 1~2 years have been. I've heard plenty of stories about developers who tried to work with them, had a bad experience, and then got demotivated and unwilling to continue working.

$ 0.00
3 months ago

what better way to attract and retain those people other than signaling to them how much this ecosystem values their work.

The stated mechanic to getting paid out of the coinbase rule for other node developers, according to amaury, is to implement another soft-fork that takes additional funds and get miners to run it.

What you are signalling isn't that developers will be well compensated for their good work on BCH - you are signalling that developers will be well compensated for their work on ABC or work for the foundation.

It is possible that the foundation might be structured in a way that aligns with your assumptions, and then you might get some benefit, but you will always be stuck with ABC competing for the talent, where they have no opportunity costs, their spending money is "free".

This market will misalign resources, but even misaligned resources can produce good value, it just won't produce the best value. Time will tell how this ends up, but don't get surprised when ABC as an organization starts spending money to aquire talent but where the incentive of the talent is to get ABC to hire them - not to build a better world.

$ 0.00
3 months ago

Look at the incentives of donations has gotten us. Basically say what Marc De Mesel or Roger want to hear and get funds.

$ 0.00
3 months ago

Not entirely mischaracterized, but also not quite fair.

Both Marc and Roger have contributed significantly to ABC in the past and now choose not to - why is that? Why did they go from wanting to contribute to ABC, to actively fighting them?

$ 0.00
3 months ago

Roger never contributed significantly to ABC. We have seen the numbers. Marc has stated he stopped because ABC never thanked him. His understanding of the IFP also leaves a lot to be desired since he erroneously thinks it inflates the coin supply.

$ 0.00
3 months ago

Working for donations is completely different from charging for your services.

The alternative to the IFP isn't charity. Voluntary funding can include charity, but it is not limited to it - and any voluntary action is inherently born from incentives.

There are people who may have incentive to cause damage or prevent good, but the same exist under the IFP model - the difference is that one model further entrenches power, while the other keeps power fleeting.

$ 0.00
3 months ago

The IFP is voluntary as well. If a miners don't want to run ABC they don't have to.

$ 0.00
3 months ago

Kindof, but now quite. Like taxes or social norms: you don't have to pay your taxes, and you don't have to follow social etiquette, but no doing so comes with consequences.

Either way, I'll agree that miners get to choose, and since they have viable alternatives the choice they make gets to be credible.

$ 0.00
3 months ago

But what makes you think the work of BCHN, Knuth, BU, Flowee will make number go up? These are all the same people who have been around since the beginning of BCH, the same people who have contributed little to nothing for three years, and only now because of the IFP have suddenly found the motivation to do some work.

Flowee never ran a flipstarter and haven't raised any funds.

However, the developer behind flowee has been trying to contribute, and when the double-spend proofs was presented to ABC they chose perfection over practicaly - since preconsensus will some day solve the same problem, they opted not to accept any solution today. When ABC leadership was questioned, their ability to be a gatekeeper crumbled, and now we have double-spend proofs more widely accepted.

$ 0.00
3 months ago

BCH is permissionless. Why have all of you been waiting for ABC to give you permission? If you think you can do it better, go do it and compete.

$ 0.00
3 months ago

That is what is happening right now.

$ 0.00
3 months ago

a 15-20% minority fork of Bitcoin Cash with centralized "Council" to decide everything is a farce. When it shows up as #49 on CMC, even with the IFP your dream of the best peer to peer cash will be even harder to realise.

Where is this blind trust in Amaury and his 5 developers comes from? You are not paid.

Thw whole point of bitcoin is decentralisation. BCHIFP will not have that. You want a board of directors? Visa and Paypal got you covered.

And I do agree the donation model that is 90% Marc Demesel and Roger is unsustainable.

Why are miners not working to develop the infrustructure?

$ 0.00
3 months ago

Well said!

$ 0.00
3 months ago

Bitcoin cash price is low now..hope it will increase soon

$ 0.00
3 months ago

Nice one

$ 0.00
3 months ago

What will you guys do if Bitcoin ABC is a minority chain, but is worth so little that the IFP will no longer fund the needed efforts? What if it's worth like $40?

Will you guys...

1) Work under your budget and not increase the IFP

2) Increase the IFP

3) Abandon the chain for something else?

If you dont know, which would you personally rather pick?

$ 0.00
3 months ago

I'm not in ABC so can't speak for them, but Amaury said in his interview with Oman that they will continue to work on BCH so long as they have resources. I imagine if the network splits and ABC is minority with a price of $40, they still have enough money raised in this year's fundraiser along with the reduced IFP money coming in to last at least another year. They will have that year to convince the market and the miners to support their coin. If not, they will have been sent the signal that it's time to work on something else.

$ 0.00
3 months ago

This is like the greatest response from both of you, and I couldn't agree more. Sadly, we're facing a new proposal which hits hard against the community, and even then, all Amaury wants (despite the notion of the silent majority yet 60-80% of BCH blocks were marked pro-BCHN and the community's overrun by the anti-IFP narrative for failing three times) is peer-to-peer electronic cash available as soon as possible (unlike Blockstream's corrupted idea of "1MB until Network is Fast Enough (which is never because we're still average like 1MB/s)") and people need development funding as an incentive to do work.

Right now, it's big-cash donations (apparently @MarcDeMesel is an early investor that invests big) versus a stable implementation that disregards* the idea of "all block reward to miners" but then Satoshi added the transaction fees to compensate 0 BTC/BCH/BSV block reward, and expected high transaction fees to replace those.

* because you know how lots of Big Blockers quote the white paper even unknowingly.

EDIT: It's good that you explained your side of things, @Cain, I just hope other people can see the beauty of an IFP (if this fails) like the BMP (which is actually marked as IFP v2 based on some circulating images).

$ 0.00
3 months ago

which is actually marked as IFP v2 based on some circulating images

I was reading about the BMP long before ABC added any sort of governance to their "IFP."

The BMP could lead to a mutually agreeable IFP vs ABC's forced "IFP," but if the forced "IFP" goes through with miner support, then a real BMP is probably dead in the water. This is just one of many exemplary reasons that ABC's behavior looks more like an attack to me than fumbled good intentions.

$ 0.00
3 months ago

Maybe you should calculate what the dollar value of the Coinbase reward would be at a coin price of 40$ and then realise that the payment is per block and spread out over time so price on day 1 after a split would not be the same as price one year later. Doing those calculations (8% of 6.5 6 24 365 coin price) makes you realise that there is a lot of reasons for this to succeed. Especially in light of the team being paid having very high incentives to do what will make the price go up. (short term and long term) as this will ensure they get paid and are able to attract more talent.

$ 0.00
3 months ago

Once you go down that road then anything is possible.

"In these difficult times, The Council has decided for a temporary increase to the Coinbase Infrastructure Funding. We are forced to raise it to 25%. Please bare with us and we will succeed together"

And watch the loyalists defend that too.

$ 0.00
3 months ago