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Unincentivised Developers, and the Real Difference Between Bitcoin Cash, Bitcoin, and Other Cryptos

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Avatar for dave_gutteridge
Written by   171
4 months ago

Every blockchain has a problem that is intrinsic to the way blockchains are created and maintained.

That problem being, that miners get paid to mine, but developers do not get paid to develop.

This problem does not simply exist without attempt to resolve it, though. Just about every single blockchain project has their own way of dealing with it. How they do so is, in my view, the most significant differentiator that determines their viability, their credibility, and ultimately underpins the value proposition of the entire project.

The unincentivised developers problem isn't exclusive to Bitcoin and the countless similar crypto projects in its wake. It's a problem for almost all open source software, which is what Bitcoin is. However, what makes Bitcoin, and almost all blockchains different from other open source projects, like Firefox or LibreOffice, is that Bitcoin is intrinsically about money and value. To create, develop, and contribute to Bitcoin is to help generate and facilitate overt wealth that largely goes to other people.

Imagine you were a developer for Firefox. You write some code and it helps web pages load faster. That's nice. Arguably, you've possibly helped people save money on data rates or something, but no one is likely going to make a billion dollars from your efforts. Or at least, it's very hard to draw any direct lines between code contributions to Firefox and the money people make.

But if you contribute code to a blockchain project, you will see lots of people around you getting rich. Investors and miners are almost certainly going to make tons more money than you. Money they wouldn't make at all were it not for you and your code. All that cash is flowing right in front of the developers eyes, but without that developer being automatically in the stream.

Satoshi Nakamoto essentially premined a bunch of coins, but, at the time he, she, or they were doing that, there was no assurance at all that this was going to be worth anything. It's plausible that Nakamoto mined the coins with no motivation other than a sincere effort to simply launch the system and keep it going until it grew into a network sustained by many people.

Almost no coin created since can claim to be as altruistic. It's a little grey, but with each new coin coming onto the market, it became more clear that blockchains had value, and no one wanted to create one without being sure that they would get some of that value for themselves.

Litecoin was supposedly distributed fairly from the start, in that mining for coins became immediately accessible to anyone who may want to try. There's a little debate about the particulars of that, but even if that's the case, it's always true that the initial developers have a jump on anyone else in terms of caring about their new coin. Vitalik Buterin mined a bunch of Ethereum for himself, securing himself a large economic incentive to see his coin succeed.

Many other coins since have essentially done the same thing that Buterin and Nakamoto did, just in various forms. There are openly declared pre-mines, and ICOs, and developer funds, and more. The bottom line is that every coin since the earliest days has been made with some system in place that ensures that developers get a cut of all that money that flows around. No developer, or investor, or anyone, wants to be sitting on the sidelines, watching miners get all the money.

Which is what puts Bitcoin in an interesting position. The lead developer seems to have disappeared, leaving a vacuum that other coins have filled with directly incentivized developers.

Note that I said "directly" incentivised developers. A Bitcoin developer could, for example, buy some Bitcoin like anyone else and then contribute code in hopes that their contribution will make the value of their Bitcoin go up. But that's different from being offered coins early, or to get an extra cut, because they help develop it. Anyone wanting to get involved in helping develop Bitcoin isn't going to do any better than anyone else who happens to buy in.

Bitcoin developers are indirectly incentivized. Is that a problem? There are two ways you might see that as a bad thing.

One is the same issue that plagues all open source projects. Without direct incentives, projects tend to progress haphazardly, both in development and progress. Projects like Firefox, LibreOffice, and GIMP, don't have anywhere near the market share as Chrome, Microsoft Office, and Photoshop. Partly that's marketing, and partly that's because of stuttered development. GIMP is an interface and feature disaster compared to Photoshop, which is a shame. But that's a topic for a different day.

The more important unincentivised developer problem for blockchains is that a blockchain without a leader is the target for those who would want to lead it, and the consequences can be severe.

Say what you will about block sizes and Moore's law and stores of value and centralization, and everything else that gets thrown around in the constant war between Bitcoin and Bitcoin Cash. But, for me, it all can be traced back to the fact that Blockstream and Core developers would have no reason to exist were it not for the potential profits they intend to capture from layer two solutions like Lightning or whatever else. Income that essentially just goes to miners otherwise.

Blockstream saw the void, recognized that with more control comes more upside, and seized an opportunity to fill it. They found a way to become the incentivized developers, and so far, their plan is working. For them, at least.

Blockstream is not the only group to try and fill the void of no incentivised developers working on Bitcoin. Craig Wright wanted to claim some of the pre-mined money held by Nakamoto by trying to rewrite the rules so that unspent or dead coins could be revived. His plan was a non starter on the Bitcoin BTC chain, but for a while he managed to get some traction on the Bitcoin Cash BCH chain. In a weird way, he was trying to be a retroactively incentivized developer. His plan was ultimately rejected by the Bitcoin Cash community, forcing him to try and make his plans a reality on a new fork.

More directly, BCH developer Amaury Séchet tried to solve the unincentivised developer problem by rewriting the rules so that a percentage of miner block rewards would go towards developers. Séchet's plan was also ultimately rejected by the community, and he also had to create a new coin, forked off of BCH.

Bitcoin is not the only coin under the kind of financial Bernoulli effect of a void inside a project creating pressure from people wanting to take over. Dogecoin's original developers walked away without any real hold over the coin, or claim to any rewards, because they made it as a joke and didn't think it would go beyond that. Now, though, it's being bought and sold for significant value. Elon Musk is circling the project, and it seems likely to me that his interest in Dogecoin is highly correlated to how much he thinks he can take command of it. Taking over existing businesses and then making it sound like he came up with them is how he got to where his now.

Sure, Musk could just buy some Dogecoin, just like he bought some Bitcoin, and maybe Tweet his holdings upwards. But, that's just the game anyone can play. Being at the helm of the ship is where you can derive real potential profits. If Blockstream can get everyone on board with Lightning, the potential billions or more to be made could make Musk look like the petty middle class in comparison.

Which is why Bitcoin Cash is different from all other blockchains. It has no leader, no directly incentivized developers. And not just by happenstance. It has twice kicked out people attempting to move into the position of lead developer. Three times if you count the initial forked that created it. Depends on if you want to look at that as "kicking out" Blockstream, or "walking away" from them.

Is that a good thing? I think yes, though with some caveats. It does mean development and growth will be haphazard and frustratingly slow, just like any open source project. It's also potentially vulnerable to people attempting more community takeovers, something the rest of the community has to be vigilant about. Each time Bitcoin Cash has had to fight off others vying for control, it's cost countless hours of debate, development slowdowns, and potentially billions dollars worth of market share.

But, the main advantage has to do with the implications of "incentive." Every blockchain project will tell you that it's good to have at least some leadership, someone to make final decisions, someone to settle arguments, someone to push things forward. Do you want to be a part of a success like Apple, or just sort of continue to exist, without becoming a household name, like Linux?

And it seems that the leaders of a project would act altruistically in terms of doing what's best for the project, because its success is their success too. It's the Utopian version of capitalism at work, where we all win together, even if some of us win a little more.

But I'm skeptical of that reality. The fact is that anyone who has both incentive and control is tempted to use that control to juice their incentives all the more. There's a reason Apple charges three times as much for their proprietary charging cables than cables for other devices made with universal USB connectors.

I'm less interested in blockchain projects where developers have the potential to steer the ship in a direction that suits them more than anyone else, while paying lip service to how it's ultimately for the betterment of all. In the void left behind by Nakamoto, Bitcoin Cash has so far shown that it will aggressively oust anyone who pursues incentive at the potential expense of the community at large.

Bitcoin Cash has no directly inventivised developers. Almost every other blockchain project will talk about that as if it's a problem. For me, it's a feature.

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Avatar for dave_gutteridge
Written by   171
4 months ago
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Comments

Satoshi Nakamoto essentially premined a bunch of coins

I don't think this is true. I wasn't fortunate enough to be around quite that early, but as I understand it, the public blockchain we know today had at least 2 miners from the start (access may have been limited by the need to compile and was certainly limited by the scope of the mailing list where the idea was born, but both of those things were circumstantial vs an intentional premine in any future cryptocurrency). I think anyone who is premining likes to claim that happened (perhaps "effectively" if they're reasonable) as justification for their behavior (and, to be fair, Vitalik may not have made such a claim). IMO, such claims are similar to how some software companies with horrible licensing or support suggest that "Microsoft does the same thing" (when that is also typically not true in those cases).

Note that I said "directly" incentivised developers.

I'm not seeing that, you may want to edit to fix (because with the limited context I have, I'm not 100% sure if you meant to say that in the preceding sentence or meant to note that you didn't).

$ 0.00
4 months ago

As far as I understand it, you're right that there was at least one other miner from fairly early on. But I don't think this changes much. Nakamoto almost certainly mined a huge amount for himself, and if he were around today, he'd be in a similar position as Buterin.

Thanks for catching my missing "indirectly"! Always nice to have a little editorial help. I've fixed it now.

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4 months ago

I honestly didn't know that developers Don't get benefits like even your affiliated miners sometime you get there profit I don't get this but also maybe the developers can get new opportunities to develope more currencies on demand and get money for that?

$ 0.00
4 months ago

Thank you for your article. It gives me more information on how to deal with this platform. Just continue sharing your ideas about.

$ 0.00
4 months ago

Wow thank u for sharing I got some ideas here especially I'm a newbie .its a big help

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4 months ago

I learned something in this article. Thank you ❤❤

$ 0.00
4 months ago

So good to have come across this article, you really made a huge point here...

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4 months ago

Wow, very nice article, keep going...

$ 0.00
User's avatar pio
4 months ago

Your article, is really good i so much love it... I don't have money to support you but my friend I have this my comment and like, you did a great job here.

$ 0.00
4 months ago

Thank u for the info.

$ 0.00
4 months ago

In my view developers are incentivized through the foundation managing the blockchain development. But that again comes down to the problem of decentralization, if you have too much influence of the founders then you are not decentralized. But, yes I do agree that developers aren't rewarded enough, atleast not as much as the miners.

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4 months ago

Miners is gaining money while developers didnt gain money at all Without developers the site will not become better

$ 0.00
4 months ago

Oh I didn't know this about BCH. I really didn't think much abt this crypto until I found read cash and noise cash. Now it is already growing on me. Haha.

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4 months ago

@MarcDeMesel , thank you so much for your generous support for this article, and in general for the platforms you've helped create.

$ 10.00
4 months ago

very welcome Dave, thank you also for the great articles, happy to discover your different perspectives

$ 0.05
4 months ago

Yes is really good article 💕

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4 months ago

"The fact is that anyone who has both incentive and control is tempted to use that control to juice their incentives all the more. There's a reason Apple charges three times as much for their proprietary charging cables than cables for other devices made with universal USB connectors."

Yes, tempted. Some would suggest that makes it inevitable the project will suffer to benefit the tempted one(s). I think that is only true some of the time and in the cryptosphere it is common for such powerful forces to continue to do what they believe is best for the project. Apple is a business selling Apple products and that example seems like comparing Apples to Oranges to me.

"... Blockstream and Core developers would have no reason to exist were it not for the potential profits they intend to capture from layer two solutions like Lightning or whatever else. Income that essentially just goes to miners otherwise. Blockstream saw the void, recognized that with more control comes more upside, and seized an opportunity to fill it. They found a way to become the incentivized developers, and so far, their plan is working. For them, at least."

I believe that is the fairytale we are regularly fed to hide the truth about what the capture of core developers and the Blockstream takeover of BTC was really intended to accomplish. IMO, it was intended to keep BTC from scaling for massive worldwide adoption (the dream of Bitcoin). If the fairytale were true, they would not have broken BTC so it could not grow into the much more valuable token that could have made them much richer. I agree "their plan is working. For them..." if their plan was to break BTC and not make massive profits. LN is a failure and their profits from this takeover seem to be much less than their expenses. Pretending it was a greedy profit-motivated effort does sound believable. Many of the deceptions used to fool us are things we want to believe.

$ 0.00
4 months ago

I responded to your message on Reddit as well, but after seeing your message here as well, I think I see a fundamental flaw in your premise that Bitcoin is deliberately sabotaged.

If the fairytale were true, they would not have broken BTC so it could not grow into the much more valuable token that could have made them much richer.

I think you're not properly accounting for the scale of the potential upside of taking control of revenue that ordinarily goes to the miners. If Blockstream had not "crippled" BTC, and instead developed and built features for layer one, much as we see developers do with BCH, then Blockstream would only be able to reap rewards on the same scale as anyone else who buys a bunch of Bitcoin.

In fact, why bother developing for Bitcoin at all when you need to buy some to be invested in it anyway?

However, if all the transaction fees that go to miners get siphoned off to a layer two solution, and then on top of that Bitcoin/Lightning does in fact become currency for the world, the potential revenue is almost unimaginable. And also constantly flowing. You don't just see the Bitcoin you hold becoming more valuable, you secure a constant flood of revenue coming from the activity on the network.

In short, to use the terminology of my article, the potential from being the incentivised developers of Bitcoin far, far, faaaaaaaar outweighs any upside from crippling Bitcoin and preserving current financial institutions.

As such, I think on top of the lack of any concrete evidence, the conspiracy theory of Blockstream just does not make economic sense.

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4 months ago

I understand the long-term profit stream-of-income concept. I just don't buy the claims Blockstream is working towards a massive profitable version of that. If Blockstream actually wanted BTC to become "currency for the world" they would not have crippled it so badly and then provided a flawed and broken 2nd layer solution. As I perceive it, the 'greed theory' of Blockstream makes little sense.

Part of my perception is that a massively-adopted LN would be mostly KYC-heavy centralized "cells" run by corporations selling products if it even made economic sense. That's not competitive with a less-KYC-required coin that is not made up of centralized "cells". Is it also open source? I doubt Blockstream could keep 'all that profit' to themselves if they actually had success.

And, the "upside" from crippling BTC was not direct profits for Blockstream. Blockstream's funds came from sources opposed to p2p cash for the world. Blocking the bitcoin dream was their mission and they succeeded. Now they get to play with the broken project and see if they can make money off of it while making sure it never threatens to make the inflationary fiats less competitive.

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4 months ago

If Blockstream actually wanted BTC to become "currency for the world" they would not have crippled it so badly and then provided a flawed and broken 2nd layer solution.

I think the point you are missing is that the 2nd layer solution is not flawed for Blockstream. You may not like it, I may not like it, but whether or not it succeeds and makes them a fortune has more to do with how effectively they can convince the market at large to adopt it, not whether or not it doesn't pass any criteria set out by you, me, or anyone else.

$ 10.00
4 months ago

What I have been saying is that I do not believe they have succeeded or actually expect to make serious profits in the future. I am suggesting it is all a sham used to fool the public. I am also suggesting many many commentators like you are supporting the false narrative because you are fooled or part of their dishonest social-engineering efforts. I could be mistaken, but, IMO it looks pretty obvious when you see the big picture.

Edit: I should add that they may have some success if no other bitcoin develops the ability to scale for massive worldwide adoption. I assume one will and BTC will collapse down to being worth less than 1% of any real Bitcoin adopted by the world as cash.

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4 months ago

It seems to me that your argument is circular. You believe Blockstream crippled Bitcoin. And they did that because they want it to fail. And your evidence that they want it to fail is because they crippled it.

Only Blockstream knows for sure what their goals are, but at least the idea that they are in it for profit is a linear proposition with a beginning and end.

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4 months ago

Yes, intentionally crippling it is some of the evidence they wanted it to fail. Their funding sources also show that intent is the most likely truth here.

Ya, their fairy tale has a beginning and end. These are well funded social engineering efforts and we should expect nothing less.

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4 months ago

Their funding sources are Baillie Gifford, Bitfinex, DG Lab, AXA Venture Partners, Digital Garage, Horizons Ventures, Khosla Ventures, Real Ventures, and Reid Hoffman. A bunch of generic venture capital firms who are in the business of investing in firms that make them high returns on those investments. There is nothing about them that indicates any sabotage, unless you have evidence that is otherwise unknown.

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4 months ago

I am no expert on the intent of the corporations you list. others have done the deep dive to determine their biases with respect to the dream of bitcoin that has been sabotaged by Blockstream and their allies. The investigator's reporting about the biases is easy to find. Also, making the "high returns" these funding sources usually expect does not appear to be their intent in this case.

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4 months ago

That's a lot of hearsay that you're relying on. Do you have any links to any of this research you're basing these claims on?

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4 months ago

You have to be new to crypto or intentionally have your head in the sand to not know what I am referring to.

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4 months ago

I know exactly what you are referring to.

I also know that neither you, nor anyone else who had spoken about this grand conspiracy has ever provided anything close to actual evidence.

Instead, everyone does what you've done here, which is try and dodge the obligation to back up your claims with dismissive accusations, such as saying I have my head in the sand or that I'm new to crypto.

It's time to face the facts, which is that you don't have any. You have hearsay, guesswork and rumors. Believe what you want, I won't be convinced by anything except an honest attempt to try and back up your claims with factual information.

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4 months ago

So, I was right. You were pretending not to know what I was referring to. I'll try to remember to let you know if AXA and the rest admit their intention to block BTC from scaling. Somehow I doubt it would convince you if they did unless they became anti-BTC for some reason and had to change the instructions their social engineering agents follow.

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4 months ago

You still have not presented a single fact, shred of evidence, or objective source for anything.

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4 months ago

"Bitcoin Cash has no directly inventivised developers. Almost every other blockchain project will talk about that as if it's a problem. For me, it's a feature."

Wholeheartedly agree!

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4 months ago