The OG Bitcoin business model is broken

This is very recommended

Well written. The BSV model solves this.

And as a Part 2 to my other comment below, this is exactly why I left for AVAX. This chaotic mess of nobody in charge of anything leaves nothing getting done, and vigilantes and bad actors coming to power.

I can see AVAX potentially suffering from not having an IFP, but i am glad we have a Foundation and a strong team thats well paid.

But there is a different incentive advantage to AVAX that you may or may not have thought of, and thats its hyper-deflationary nature.

Through fee burning, externally incentivized staking (via subnets), and a hard cap on supply, we have a system that rewards holders from the value generated by applications and usecases built on top.

An actual store of value, an actual reason to adopt AVAX. Buy AVAX, and if others use AVAX for its utility as a platform, the price of your AVAX should increase.

But then again on the IFP, even if AVAX had an IFP, it would dry up because inflation is temporary. So maybe its just an alternative means to an end. But we can do an IFP on a token built on AVAX, if we can find a way to justify demand for that token. Who knows.

I hope to see more collaboration between Bitcoin ABC and AVAX. Maybe cross chain atomic swapping of all assets? Hey, its possible. Two blockchains, one POW, one POS, and lets clear out all the weak projects clogging up the top.

I think some noteworthy points were made in this essay, and that people that care about merchant adoption should give it a read. I liked the point you made about burnout. There are so many ways to spend ones resources to further bitcoin cash adoption. The problem is, how do you know which actions will be the most effective in furthuring adoption and which plans will not be as worthwile? When profit is tied more directly to the venture, it acts as a mechanism to signal which efforts will be most effective and similtaneously fuels them. This is my conclusion too after talking with many people on Bitcoin Cast about BCH adoption, and even being a leader of it in SoCal.

As far as criticism goes, you pointed out different business models in the crypto space, but failed to mention the business model of the Bitcoin Cash Node company, which has a similar business plan to AVAX. (Raise investment capital. Deliver. Profit.) What makes one business model more profitable than another? Maybe you could argue that charging a fee for a provided service is better business model.

I typed out a response to the article here: https://read.cash/@noise/the-og-bitcoin-business-model-works-fine-ec62a251

A few points where I think you are mistaken:

There simply is no money to be made directly from replacing the USD with Bitcoin.

I don't know how you reach this conclusion. Have you actually tried? There seem to be plenty of people earning money from Bitcoin in various different ways. Brian Armstrong, Roger Ver, Erik Voorhees and Jihan Wu would probably disagree with you.

So far, the OG “business model” for that has been: Buy Bitcoin, adopt/develop for Bitcoin, Bitcoin increases in value, profit.

The names listed above are all people who have made direct profits from the services they provide, not simply from the increase in price of their holdings. An increase in Bitcoin's price is a multiplier for sure, but companies like Bitmain and Coinbase did not "Buy Bitcoin" when they started, they earned Bitcoin.

Some contradiction here:

this business model drove initial Bitcoin adoption.

and then in the next paragraph:

this is a really, really terrible business model. It doesn’t work.

Perhaps you mean it doesn't work "any more". Or perhaps it's just become a bit more difficult and you wish you'd had it easy like them.

It suffers from the free-rider problem.

Investors are not free riders. They contribute capital. They are the source of the increase in price. They are the customers to the mining companies. They send a price signal to the world.

It doesn’t matter whether you work hard or slack off in that model, you get the same reward.

No, your reward is proportional to your investment and therefore to the amount of price signal you contributed. You're getting suspiciously close to the exploitation of labour argument here.

Even worse, for Bitcoin, if you were not an early bird and didn’t get in early, you will profit much less than people who did get in early.

This is a feature of markets, not a bug. It incentivises investors to search for and identify promising companies or technologies, to invest in them and to send a signal to the world, which is exactly what folks like Roger did for many years.

So this way we basically remove all the future talent from the pool of people who would help replace the USD.

I don't know what you mean by this. There is loads of talent here, yourself included.

If we use the OG “Buy Bitcoin, Adopt Bitcoin, Profit” model, we artificially turn Bitcoin adoption/development into a public good.

Easily refuted by example: Coinbase, Bitpay and Bitmain are all examples of companies which produce private goods that "make it useful to people in commerce". I'd like to see be.cash join their ranks!

Right now, adoption/development is mostly done by people who selflessly approach businesses/write code (or are paid by selfless people, in form of donations).

Not true. Just because they're the loudest on social media doesn't mean they're doing the most. The contributions of profit-seekers to development and adoption is huge.

But other than that marginal increase in Bitcoin’s price, they get nothing in return.

I think you're talking about something along the lines of:

1. Start with almost nothing but buy what little Bitcoin you can afford.
2. Work on Bitcoin full time and for free.
3. Expect increase in price of your holdings to provide your primary source of income.

I agree this model is not feasible or smart as a day job or main source of income. I also don't think it's what Roger was suggesting. I don't know any people doing this apart from perhaps ABC. Most others in the community have some other source of income. If they were early-birds they have crypto savings, if not they have a paying job.

There’s actually a way to make public goods work. Nobel prize winner Elinor Ostrom guides us on how to “govern the commons”.

This is not really compatible with the Austrian school of economics. See Hoppe's refutation of public-goods theory and Block's refutation of Ostrom. I'm not saying you have to buy into the Austrian school but, well, you do have Mises as your mascot.

If we go through that list, we quickly realize that none of them work for the OG Bitcoin business model, because it is a permissionless system.

Correct, so please tell me you're saying we should dispense with Ostrom rather than we should modify BCH according to her system?

To make matters worse, a lot of prominent people supporting the OG Bitcoin business model are actively hostile to the very idea of profiting off the protocol.

This is a disingenuous straw-man argument. For example those folks have no problem with miners profiting off the protocol. Their issue is with a change to the protocol that lacks consensus and which they see as benefiting some at the expense of others.

A similar sentiment is shared by many people who unironically call the Coinbase Rule a tax, proposing it is theft.

This is known as a metaphor ("a figure of speech in which a word or phrase is applied to an object or action to which it is not literally applicable") or simile ("a figure of speech involving the comparison of one thing with another thing of a different kind, used to make a description more emphatic or vivid"). Since you've drawn comparisons to Bolshevism and Marxism you surely can't be making this point unironically?

Instead, we need to embrace the profit motive, and come up with business models that actually work, models that incentivise participants correctly.

And here's the problem with the IFP: even accepting that it's not a tax, just a business model, you're still left with the problem that it's a bad business model. Or perhaps I'm wrong and there are lots of customers (miners) who can't wait to purchase this new product on the 15th of next month.

I like the general idea of IFP, but lets be precise here. Bitcoin didnt replace the USD because of theymos. he was offered craploads of money to drop the censorship. He refused. Same story with blockstream and changing one number in the code. Your whole premise is wrong.

now, adoption/development is mostly done by people who selflessly approach businesses/write code (or are paid by selfless people, in form of donations)

no, they are not paid by selfless people, they are paid by bitcoin shareholders

unironically call the Coinbase Rule a tax, proposing it is theft.

attempting to implement the IFP without seeking agreement of the shareholders is embezzlement, a theft and a betrayal. The only viable path for amaury how to get rid of that labels is to drop the forking attempt until after the shareholders vote for it (through the council, BMP or otherwise)

The funniest thing however is that what you call the "donations model" is exactly the answer the anarcho-capitalists (which amaury is a passionate promoter of) give as to how the society will work without governments. Instead of cheering for finally having the opportunity to prove that it works, they call it communist/marxist shit and ask for a tax instead. Hilarious.

In 2020, the FED prints 22% of all USD ever created. Clearly, the USD is headed for a big inflation.

This was the libertarian talking point in 2009, too, and it failed to materialize. What is different? There should be a qualitative difference to justify the claim of a different outcome, not just quantitative.

People have been making this quoted simplistic argument since at least the 1970's.

I believe we can replace the USD quite quickly if we just adopt an incentive aligned model

This is a great talking point for the libertarian faithful (ideologues) but clear-thinking people recognize it as over-promising.

we need to embrace the profit motive

That is what the current model is. Build a business with Bitcoin Cash.

You pulled out one post of one person in an attempt to strawman the ecosystem.

The "global network council" does not rely primarily on the profile motive but on the insider leverage Amaury thought he had so he could get a guaranteed 4-8% or more of the block reward every 10 minutes.

Wrapping yourself in the flag is a time-worn tradition but people recognize it for what it is these days.

Well said.

The strategy is again how to fund incentives. Stimulation of protocol development does not do this. Yes it makes it better to make tools to increase acceptance but tools will only be made if there is a demand.Which should go to fund. If any part of the block award goes elsewhere, it should be distributed to people and businesses who use and receive BCH as PH cash. See it as spending or paying for saving .The most effective system for humans is a centrally controlled T-loading system without market forces in the game. If you don’t understand it, you can’t understand Bitcoin.

A few points:

1. Gold, silver, and other commodities have no business model or profit-seeking development group. Why on earth would you recommend people invest in them?

2. Small blockers/Blockstream did not sell anyone on the idea of Liquid during the block size debate. They planned to profit off Liquid, but the solution they were selling at the time was Lightning, which they should have and probably did already know would fail as a scaling solution.

3. What does ABC have to do in order to profit off the IFP that early adopters and free riders don't? Absolutely nothing. They can choose to do work to hopefully create more value for BCH, but they don't have to. It's the same for the early adopters you mention as being unhelpful.

Excellent overview. You really hit the nail on the head with this one.

People are going to read this however, except not actually read it, because it will go over their heads. I wish there was easier ways of explaining what you are saying to the people in BCHN, because its basically pointing out that the "Roger Ver Model" of spend to make price go up clearly is subject to market-failure, like in all communist/marxist models.

Its basically "If everyone does this, then it works. Okay, now you first."

If we cant get to the endgame through following our own self interest, then we ABSOLUTELY will not get there. ESPECIALLY since Bitcoin is a system of INCENTIVES.

Every business model has to profit in some ways eventually. The peer-to-pear network does not seem to work well with the donation model though. On-chain incentive seems to be the way.

Your article is great !!! I have recently entered the world of cryptocurrencies, so all this information is very useful to me!

To really increase adoption the only real way to do that is incentive. The trick again is how to fund incentive. Incentivizing protocol development does not do this. Yes it creates a better base to build the tools to increase adoption but the tools will only be created if there is a demand.

Any sort of funding should go to driving adoption. Once there is more demand for new and different capabilities money would then be put towards developing that.

If a portion of block reward goes somewhere it should be distributed to people and businesses that actually use and accept BCH as a p2p cash.

An app could be built with a wallet address that receives the portion of every block reward then every x number of blocks the funds are distributed based on that time periods use. See it as getting paid to spend or saving money by spending. However I'm sure there is a way to abuse this system and safeguards would need to be put in place to minimize it.

I agree the "OG business model" is not viable.

However, I think you don't understand the value proposition of Bitcoin (the concept). The main advantages bitcoin has over the USD are:

• Censorship resistance: it is hard to censor transactions.
• Inflation resistance: it is hard to create new units and debase the currency.

Therefore, the main goal of Bitcoin is not to be the most cheap, fast and reliable currency, although these characteritics help a lot (that's why I support BCH and not BTC). We do not need another Paypal.

For me, introducing this arbitrary rule (sending 8% of the subsidy to one address) is very dangerous. It drastically reduces the inflation resistance of Bitcoin Cash by centralizing governance around Amaury/ABC: on the ABC chain it will be quite clear that the man in charge is Amaury, and changing emission schedule will become easier for him. This arbitrary rule also lowers the censorship resistance of the chain (less hashrate) which is already quite low.

Finally, refusing to cancel this plan is really damaging for the whole coin itself (market doesn't like uncertainty). If you want to work for a coinbase-funded cryptocurrency, go to another coin (Dash, ZCash, Decred) or create your own coin, don't support this sneaky soft fork by ABC.

I do totally agree about the donation model burn out the only logical conclusion.

The most efficient system known to man is a centrally controlled tax bearing system without market forces at play. If you do not understand this, then you do not understand Bitcoin.

Great article!

Hlw sir it's very new information for me I am grateful to read this message I really appreciate it thank you

Wow, great article , I got a lot of things

"yet another team who wants to use the protocol for their own profit”

ABC doesn't want to "use" the protocol for their own profit (that would be fine). They want to control the protocol for their own profit. I'm sure if the world needs an Amazon-coin then Amazon will make one. How will ABC-coin ever hope to compete with it?