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Jiang Zhuoer recently announced an initiative among some miners and mining pool operators to provide funding for Bitcoin Cash infrastructure. The goal of this article is to explain my assessment of this plan, by first explaining what I think is important for Bitcoin Cash as a project, and then going through various aspects of the plan that have been raised and commenting on them on by one.
When I first heard of the Miner Infrastructure Funding Plan (IFP), I thought it was a good idea. I liked that the miners and large pool operators cared enough about BCH to do something to support its infrastructure. However, I was a bit surprised and concerned when I saw extreme negative reactions, in particular from people I respect such as Imaginary Username. I still don’t completely understand why he is so opposed, but the intensity of his reaction made me think it must conflict with something he holds as a core principle.
This got me thinking about what core principles I hold, and how well the announced IFP aligns with them.
The reason I am interested in Bitcoin Cash is to promote freedom in the world. I think that global peer-to-peer electronic cash would help shift the balance of power toward economic freedom, and away from coercive control.
I think that the goal of global peer-to-peer cash is best achieved by going “all-in” on Bitcoin Cash, as that is the project best positioned to achieve the goal.
I believe that the project should uphold core principles of non-coercion and reciprocity. These principles are important both for ethical and practical reasons. Without them the large-scale cooperation needed to realize our goal cannot be sustainably maintained.
To achieve the goal of Bitcoin Cash as global sound money, certain characteristics are non-negotiable. These include the fixed supply schedule, and spendability that is “fast, cheap and reliable”. The focus should be on these characteristics of end user experience. Mining is an important part of the system, but is ultimately there to serve the end user, and make the Bitcoin Cash useful, trustworthy and reliable for them.
This question has been asked 1000 times, but here’s a different perspective: If anything should be compared to a tax, it is the block reward itself. The block reward is like a “tax” on all BCH holders going to the miners. The purpose of the block reward is to bootstrap the network, by funding security until transaction fees can take over, and to solve the problem of initial coin distribution.
To the extent that the block reward is a “tax”, the Infrastructure Funding Plan is not a new tax, but a reallocation of the existing one. Given that the purpose of the block reward is to bootstrap the network towards mass adoption, it makes sense to direct those funds to the areas that can help this bootstrapping. If the miners decide that sending a portion of the coinbase reward to fund common infrastructure will maximize the long-term value of BCH, then this seems like a sensible way to allocate resources.
Many people have expressed concern about a “shady Hong Kong corporation” controlling the funds. But the corporation can be just a legal formality, simply serving the purpose of protecting people who handle the funds from personal legal risk.
For example, say the funds are held in a multisig wallet, by people who are all outside of Hong Kong. The purpose of the corporation would simply be to have a legal “owner”, since none of the key holders would want to personally own the funds.
What is important is how the funds are actually managed. Here are some of my thoughts on how this should be done. These points could all be defined in the corporate document that delegates management of the funds.
The funds should be held in BCH only, no need for a bank account.
The amount being held, and where the funds are disbursed should be transparent, with regular reports detailing what has been done.
The funds should be periodically distributed to pre-existing projects which need funding (ie, the fund itself won’t hire people directly)
Decisions on where to allocate funds should be made with input from miner stakeholders and the broader community.
The funds should be managed under the assumption that the 6-month duration is firm, and more funds will not be available. This means that the majority of the funds would have to be held, to be disbursed over two or three years.
Some people have objected to the fact that the plan includes “orphaning”. This issue revolves around whether miners can choose to produce blocks that don’t contribute, or if the plan involves some sort of enforcement that all miners must only produce blocks that contribute.
Bitcoin Cash is a system of reciprocal altruism. This means that it is composed of groups who cooperate with each other. Cooperation is only stable if the people doing so are selective and only include those who reciprocate, and exclude those who don’t. This is normal and natural, and without it large scale cooperation is not possible.
As Amaury pointed out in his recent article, any plan that punishes the people who cooperate, and rewards those who don’t, is doomed to failure. Doing this plan without enforcing the rules would mean that contributing miners on BCH would incur significant losses, whereas the mercenary switch miners would reap all the profit. By contrast, a plan which does enforce the new rule for everyone, as proposed, means that all SHA256 miners would see a modest 0.3% reduction in revenue spread across the various coins.
So, for reasons of both principle and pragmatism, I believe any miner funding plan must include enforcement of the funding. This would effectively make it a consensus rule.
The idea that the proposal will be limited in time has been met with incredulity by many. They say that it’s obvious that once the funding is in place, it will never be removed. The counterargument is that cartels are unstable, and so it’s likely this setup would fall apart at some point.
Personally, I can see validity in both opinions. It is true that once a precedent has been established, it will be easier to do it again in six months. If the fund seems to be working well, maybe that’s not such a bad thing. One the other hand, we definitely want to avoid having an entrenched set of “rent seekers” who just mooch of the infrastructure fund with no way being removed.
I’m not sure what the solution to this tradeoff is. A few suggestions I can think of are:
However it is implemented should be done in such a way that it discontinues without an active step to continue.
Perhaps the parties involved could commit in advance to the set of criteria that would be needed to continue it for longer.
As mentioned above, funds should be managed under the assumption that the plan won’t be renewed, to avoid getting into a situation where people are desperate to have it continue.
For me, the biggest counterargument to most of the criticisms is “what’s the alternative”? It is extremely difficult to get agreement on any miner funding plan, and this has been attempted going back to 2018 in Hong Kong, and even earlier. At that miner summit, there was much discussion about miner voting, and various other schemes. It seems that every alternative plan has some other down side, and more complicated plans are virtually impossible to come to agreement on, let alone implement.
When looking at possible alternatives, a major virtues of Jiang Zhuoer’s plan becomes apparent: Simplicity. There is a tendency for proposals to continuously add complications and features as they try to appease all the various factions expressing different opinions. This is a major problem, as complicated proposals will inevitably run into implementation problems, and devolve into endless bikeshedding. A simple plan is far more likely to be achievable. A complicated bureaucracy or voting process is more likely to become entrenched as more and more people are involved and gaming the system. A simple structure also has the virtue of being easier to remove in the future.
The alternative of “do nothing” also seems worse. For the last few years, infrastructure developers have been “running on fumes”, with huge amounts of effort put into securing meager and unstable funding. Even though some funding has been found to enable things to limp along, just the fact that it comes with so much uncertainty hobbles any ability to make long term plans.
I think the miners are sending a very important signal: They care about Bitcoin Cash, and want to find ways to help it succeed.
It is easy to criticize details of the plan, but I believe that when compared to every possible alternative, the plan Jiang Zhuoer announced is better than any other plan, and better than doing nothing.
It is difficult for a diverse group to come together on a common plan, so I think it’s amazing that the signatories were able to come together on this, and I commend them for that. If this plan does not go forward, I think this chance will not likely come again.
Ultimately, the question I ask is “does this plan advance the goal of building and spreading global peer-to-peer electronic cash?” For me the answer is a solid Yes.