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My View on the Miner Infrastructure Funding Plan

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Avatar for Mengerian
Written by   50
1 year ago

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.

Principles

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.

Is it a “Tax”?

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.

Who will build the roads?

The “Shady Hong Kong Corporation”

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.

Is it a Consensus Rule?

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.

Reciprocal Altruism

The 6-month Duration

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.

Alternatives

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.

Funding proposals tend to become too complicated

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.

Conclusion

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.

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Avatar for Mengerian
Written by   50
1 year ago
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Comments

Clear thought are presented.nice ..

$ 0.00
6 months ago

Personally, I don’t think you should give too much credence to the naysayers who gripe about offshore corporations. As they say, haters gonna hate. But from a banking and regulatory point of view, you may run into more issues setting up shop in some Caribbean island with a bunch of ninnies than you would in a stable, trusted jurisdiction like Hong Kong.

After all, the world views Hong Kong with envy. It’s a solid financial center with real business activity. They’re not just churning out boiler-plate corporations to collect a filing fee here. Hong Kong has real professionals, real bankers, and real lawyers. No one who knows what they’re talking about is going to accuse you of using a Hong Kong corporation for shady purposes or to hide out. That can come in handy, for instance, if you’re trying to raise capital.

$ 0.00
7 months ago

This got me thinking about what core principles I hold, and how well the announced IFP aligns with them.

$ 0.00
7 months ago

Amazing..👏👏✌

$ 0.00
8 months ago

Hello mate, I'm your Subscriber, can you Subscribe me too? I also write about Crypto..

$ 0.00
8 months ago

Bravo! 👏👏👏👏

$ 0.00
8 months ago

Anthony, what are you doing? Will you be the very last person to realize Deadalnix is poison to BCH?

$ 0.00
1 year ago

Why should miners be forced to grow our bags?

$ 0.00
1 year ago

I think risking a split is a VERY big reason NOT to go through with this. Also, there is definitely coercion involved. In this time it looks like a split is guaranteed unless the plan is adjusted or dropped:

https://read.cash/@shadow-kwh/bch-dev-fund-a-response-from-an-opposing-mining-group-4397e64b

$ 5.00
1 year ago

Great post!

$ 0.00
1 year ago

I also read about it before! But I feel good to see that you think about it so deeply and also shared it.

$ 0.00
11 months ago

Since you referenced Amaury's recent article, I will ask you:

Did you speak out publicly anywhere against his suggestion to appoint developers (himself and you at least, from ABC, but including others) as custodians of the collected funds via a multi-signature scheme?

If not, could you please state your opinion on that suggestion.

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1 year ago

Amaury just chose him self and people who support him, there is no others there.

$ 2.00
1 year ago

Amaury wrote:

I propose that the control of the key needs to be in the hands of people who have proven they work in the best interest of Bitcoin Cash, even during rough times, have a commitment to infrastructure and a proven track record, such as Jonald Fyookball, Mengerian and myself.

To keep things fair, I will ask Jonald Fyookball the same question that I asked Mengerian above (since Jonald also has an account here).

I hope they both reply and give their opinions, because I have not seen them publicly comment on the suggestion.

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1 year ago

Yeah I agree! 👏👏

$ 0.00
8 months ago

No, I didn't speak out against it, or comment on it until now.

Personally, it's not appealing to be put in a position where I would have to be responsible for handling that money. It's probably a thankless job, and would subject me to lots of scrutiny and criticism. I would consider doing it though, if I thought it was in the best interest of Bitcoin Cash overall.

I'm not sure what the alternatives would be, do you have suggestions for how to handle the money in the situation there is a general BCH development fund? Do you think it should be non-developers? (that's what you seem to imply)

Seems to me you'd want people who have a long track record in the space, who are known and trusted by the community, and by the miner groups, have a good understanding of the development space and activities, and have a record of handling funds responsibly in the past. I'm not sure if I'm the best qualified or not, I'll leave that for others to judge. But it does seem like you'd be picking from a pretty small pool of potential people.

$ 1.00
1 year ago

Thank you for the thoughtful and comprehensive answer.

do you have suggestions for how to handle the money in the situation there is a general BCH development fund?

It is up to such a fund how to organize itself, but I think avoiding conflict of interest of its decision makers should be a top priority. To illustrate what I mean - I don't think anyone invested in a project that is potentially at the receiving end of the collected funds, should be involved in deciding who gets the funds, in order to avoid self-dealing and influence peddling.

A general *anything* fund would answer to its donors, it would be up to them to determine the level of accountability they expect.

I'm not opposed to any such funds (although I've had bad experiences specifically with a "General" fund's administration).

I am however, sternly opposed to the method of "collection" suggested in the initial IFP proposal that is now, hopefully, half-way off the table.

UPDATE: looks like the plan isn't off the table after all.

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1 year ago