One way or another, this proposed development fund will end up being a good thing. The BCH community has finally been shaken out of its slumber. There are real philosophical disagreements in our community that need to be sorted out.
Until further details are shared, I remain ambiguous towards the proposal itself. There isn’t enough information to have a strong opinion. The implementation details are everything. The fund could end up being anywhere from good enough to solve our problems to bad enough to break the whole system.
These debates usually divide down party lines. The most likely to benefit from this fund are its most vocal supporters, while the least likely to benefit are its most vocal opponents. This makes it difficult to find any clear-headed analysis. I see good ideas on both sides and have seven points to make in this article.
I do find it amusing that several public BCH figures are now throwing around accusations that this is essentially a coup from Bitcoin ABC, that it’s a mandatory developer-tax, and that we’ll see the next Bitcoin Core 2.0. These are the concerns I’ve been sharing for months, and they’ve gotten me de-platformed from public debates and censored from the main Telegram channel in BCH. In fact, the same individual people that attacked me for being a BSV shill - because I’m critical of ABC - are now considering leaving the project because of developer capture.
Now that other people see problems with Bitcoin ABC’s leadership, I look forward to being uncensored. Point number 1:
1. It’s not a tax, really.
I can understand why people don’t like the proposal, but it’s not a tax. Really. Language matters, and it doesn’t help to charge the discussion with emotional words like “taxation” - especially in libertarian circles! There are no threats of violence or jail-time if miners refuse to pay.
It’s akin to a subscription fee. If miners want to connect to the majority-hashrate blockchain, then they agree to a 12.5% fee. A rough analogy to my own business is Patreon. I pay them around 10% of my earnings, and in return, they connect me to their platform that I leverage to make more money. If I don’t pay, I don’t get to use their network.
2. Minority hashrate has no rights.
I’ve heard several small miners essentially say, “Since I am a miner, and miners have the power, I should be able to veto this plan!”
While it’s true that miners ultimately control the system, it’s not because they are miners. It’s not their identity which gives them power. It’s because, at the end of the day, the state of the blockchain is decided by majority hash. It is whatever the majority hashrate agrees on. Minority disagreement gets effectively resolved and eliminated within a few blocks. The only way to permanently disagree with majority hashrate is to fork away from it.
Protesting the majority because you own a miner is similar to protesting the majority because you own a node. You don’t have the power to push through changes or resist them yourself.
3. Hashrate really does decide (with one exception).
An unfortunate result of the BSV split is that a significant percentage of the BCH community has started to define their identity in opposition to BSV. So, whatever the BSV people say, we say the opposite. If CSW says the sky is blue, then people start pretending it’s stupid to believe the sky is blue. Despite the insistence of some self-appointed “community leaders”, there are indeed good ideas in the BSV philosophy, and we would be wise to import them.
For one, they seem to correctly grasp the power structure in PoW systems. Fundamental disagreements about the protocol are indeed resolved in “hashwars.” That’s the correct way to understand the system. It’s fine not to like proof-of-work coins, but that’s how they are designed. Despite the past failures and miscoordination among miners, they are emphatically not the “janitors of the network”.
Node operators and hobbyists can vocally protest and object to changes, but they don’t have the power to restrict the decisions of miners. I’m not making an ethical claim nor any “should” statements. I’m just saying they don’t have the power, whether that’s a good thing or not.
There is one notable exception. The broader non-mining community does have power to change the PoW function in extreme circumstances, which is essentially the nuclear option. I wouldn’t support such a change, but it’s something the miners by themselves can’t prevent. If all of the exchanges, businesses, and relevant individuals in the industry decided that the PoW function should change - and they took the ticker symbol with them - it would essentially destroy the miners.
Barring such an extreme change, the miners are the ones enforcing the rules, which means they are the ones deciding the rules.
4. Miners are essentially cartels.
If miners can get together and decide the rules, doesn’t that make them a cartel? Yeah, kind of. But that’s not necessarily a bad thing. “Cartels” have gotten a bad reputation, like “monopolies” - both economic phenomena that can naturally emerge in a market and still be net-positives.
Cartels and monopolies become problematic when their position is granted by government. Burt Folsom has good material on this topic in his book The Myth of the Robber Barons. Even the textbook boogeyman, Standard Oil, was a massive benefit to the world, and it retained its near-monopoly status by selling valuable goods at a low price.
Cartels are no different. So long as there aren’t artificial barriers to entry, a cartel isn’t necessarily a bad thing, and it won’t be a permanent thing.
Another way to think about it: 51% coordination isn’t necessarily a 51% attack.
5. Amaury Sechet was positioning Bitcoin ABC to become Bitcoin Core 2.0
Several months ago, I decided that I needed to get more involved in Bitcoin Cash because I saw warning signs that we’re walking down the road to Bitcoin Core 2.0. My suspicions were confirmed mere hours after developer fund proposal was public. Immediately, Amaury Sechet wrote an article that seriously recommended he and his friends hold the keys to the funds. Here’s a quote:
"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."
While I’ve been critical of Sechet, even I was shocked when reading it. I see this as effectively a shit-test for Bitcoin Cash. If they accept his proposal, then they deserve to be fleeced. I feel a similar way towards Richard Heart, who clearly believes that most people in crypto are clueless, so he just decided to play the game and take their money.
I’ve wondered why Sechet got so aggressive over the last several months. He’s been trying to purge anybody that disagrees with him - even if they’re OG’s like Bitcoin Unlimited, Peter Rizun, or even myself. He’s publicly turned down donations, despite being underfunded. But now I get it: he simply wants total control of the project - to be the lead implementation that controls the keys to his own development fund. By his own admission!
If Amaury instead chose to be funded with individual donations - perhaps by setting up a Patreon account like I have - then his donors might place constraints on that funding. However, if funding comes from a block reward, and is essentially a slush-fund that he controls, he can spend at his own discretion.
Perhaps his suggestion comes from a place of good intentions. Perhaps not. I’m unsure, but regardless, it was a demonstration of bad ideas and judgment to write that article. I hope the relevant players in BCH took notice.
6. Decentralized development is critical, and this fund could destroy it
Whenever one development group starts claiming they’re the best in the world, starts purging dissenters and censoring discussion, there’s a problem. Bitcoin Cash has one of the most decentralized development teams of any cryptocurrency, and we need to make sure it stays that way.
Due to the lack of implementation details, I can’t say I’m “for” or “against” this proposal. However, I can say beforehand that if these funds are given to developers, to distribute amongst themselves, with no direction or oversight from the outside industry, then we will lose decentralized development.
7. Minority hashrate has power, too
Majority hash can most effectively bully the minority if they are too small to create a viable fork. Their current strategy looks much riskier if there’s significant dissenting hashrate and market participants.
If this proposal ruffles enough feathers, we might see sufficient hashrate and support to create a viable fork. If this looks like a real possibility, I suspect the proposal will be cancelled, since BCH isn’t large enough to sustain another split - especially if the goal was merely to secure funding for one development group.