On the infrastructure funding plan for Bitcoin Cash

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1 month ago

Recently, Jiang Zuoher from btc.top indicated that he and a group of miners want to create a fund for Bitcoin Cash's infrastructure. This is great news. This may sound to some like the proposal fell from the sky, but it has actually been a long time coming. The Chinese mining community has been attempting for years to do something similar to what is currently being proposed.

Earlier attempts failed for various reasons, but mainly because it is difficult for a set of actors who are otherwise competitors to agree on something for an extended period of time. A group of competitors in an industry setting aside their differences to partake in actions for the benefit of the industry is called a cartel, and cartels tend to be unstable. They asked myself several times to implement such a measure in Bitcoin ABC directly, to which I responded every time that such an initiative needed to come from the miners as there is obvious conflict of interest if devs decide to take away money from miners and pay themselves with it. Some lines are best not crossed.

Sound game theory

The proposal is very interesting from a game theory perspective. Bitcoin, all flavors, have suffered from a problem funding the commons as popularized by Lloyd. The commons are public goods that benefit the ecosystem as a whole, whether each participant pays for it or not. This often leads to the tragedy of the commons, where everybody expects everybody else to fund the commons, and nobody does, or only do so to an extent that is not sufficient for the whole ecosystem to thrive.

In the early days, developers, miners and users were essentially the same people, so this was fairly simple. As the system grows, economic specialization took place and this is forcing us to think about the incentives that these specialized groups have to cooperate with each other. And they are not good. The people who care most about the system will voluntarily fund commons, while people who decide to be parasitic and use the commons without funding them will not. This creates an ecosystem in which those who care about the system are disincentivized and parasites are incentivized. Such an ecosystem is bound to attract a lot of bad actors, and, as a matter of fact, we can verify that it indeed does.

Any ecosystem that is unwilling to look this reality in the face is bound to either fall into irrelevance or be co-opted by parasites.

A group of miners is proposing to try something different that does not have this drawback. Moreover, they decide to do it using Bitcoin Cash, which demonstrates support and commitment to the project.

However, while the game theory is sound, several people have voiced concern with this plan.

Not a tax

A tax is a compulsory contribution to state revenue. Let's ignore the state part of the definition, as miners are clearly are not a state, but this is not really the crux of the argument. What people calling it a tax have a problem with the compulsory contribution. So, is it a compulsory contribution?

I would argue that it is not.

When a miner mines of top of another miner's block, they effectively choose to cooperate with this other miner. They usually do so because it is in their best interest to, but nobody is ever entitled to anyone else's cooperation. What this group of miners is saying, is that they do not wish to cooperate with other miners that do not wish to fund the commons.

They are not forcing anyone to do anything. Other miners can mine another chain such as BTC, or even decide to mine a chain that will not fund the commons. What they cannot do is force Jiang to accept their block if they do so, or to force the market to value these blocks at a certain price, if at all. Jiang does not have this power either.

Once a cartel is in place, it won't be able to impose its will on the chain

Some people are concerned that, while funding infrastructure is good, forming a cartel to do so is not. I think these people are used to government created cartels, such as what happened when the government creates licensing laws. In a free market, cartels tend to be fairly unstable.

It is important to keep in mind that cartel participants are otherwise competitors. They therefore all have an incentive to defect from the cartel. A cartel can hold for as long as all of its participants see a benefit in the actions of the cartel. And it seems that they all see a benefit by making sure that the infrastructure on top of which their business is built is robust, and remains so going forward.

So what about other measures? Could transactions sent to wikileaks be censored for instance? I will argue that it is not credible that all participants in the cartel see this as a beneficial development, and the most likely outcome of such a proposal would be the dissolution of the cartel.

Beware the money you take

When accepting money, you always give up some power. It can be explicit like in the case of an investment firm providing money to a company in exchange for partial ownership. But even when no such things exist, whoever funds a project always ends up having some control over it, at the very least because the funding can be pulled.

This is why Bitcoin ABC has been very careful about accepting funds. For instance, we recently rejected funding from OKex for that very reason.

However, no organization can operate durably, yet alone thrive, without funding. The miners who decided to propose the plan all have proven that they care about the success of Bitcoin Cash. I cannot think of a better source of funding.

In addition, the value of the funding depends on the value of BCH, which creates great incentives for its beneficiaries to act in the best interest of Bitcoin Cash.

Who control the funds

This is obviously the elephant in the room. After all, maybe Jiang, Jihan and others only plan to cooperate to increase their share of the mining reward and won't provide anything to the infrastructure?

First, such a scenario is highly improbable, as we've seen before, the cartel would dissolve. But the question of transparency of the funds remains. We need to be sure they will be spent in a way that benefits Bitcoin Cash's commons.

This is a difficult task because we do not want to transform the whole thing into a bureaucratic process that would be both slow and inefficient. In a free market, the most efficient system wins.

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. This would effectively give 2 people in this group a veto power over spending, and, obviously, miners would also have veto power as they can decide to discontinue the plan.

I would also invite a group of trusted community members, such as Vin Armani, Josh Ellithorpe, Chris Pacia or Mike Malley who can advise on ways to spend the funds, as well as blow the whistle in case something fishy is going on. A group of 7 to 12 miners, developers, and businessmen in total would ensure that various sides of the ecosystem have their say without bogging down the whole thing with unnecessary bureaucracy.

Conlusion

I'm enthusiastic this proposal can yield very beneficial results to Bitcoin Cash, granted the details are done right. I think the proposed setup would inspire more trust from the community than a faceless corporation, which seems to be the major concern.

I predict that if this is done right, the impact on Bitcoin Cash can be fantastic and will result in benefits for all ecosystem participants.

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Comments

This is usual socialism in crypto disguise.

$ 0.00
4 weeks ago

It would be INFINITELY BETTER if the BCH entities who are behind this proposal just agree amongst themselves to set up a consortium to fund developers without dicking around with the protocol and mining reward allocation.

It would be to their interest to fund the BCH commons as they hold it as their biggest assets and also benefit disproportionately as the BCH ecosystem increases in value. Surely between the 4 or 5 of them $500k-$1m for a year or two is peanuts and would reap them dividends down the line.

If smaller BCH entities piggyback off of what they have financed, they shouldn’t mind as it means they just grew the ecosystem and ultimately benefit themselves even more.

$ 14.60
1 month ago

I think the funding is essential, especially for a tertiary stakeholder like developers. Perhaps calling it licensing or tipping would be better? And is there a way to fund it directly to the developers instead of an intermediary?

$ 0.00
4 weeks ago

Thanks for writing this clear and understandable

$ 0.00
1 month ago

For the sake of community unity, I would also suggest to invite sceptics/opponents of this plan to join the group of people controlling/supervising the fund, provided they are developers with a proven track record like the other members. In particular I'm thinking of imaginary_username here.

What they cannot do is [..] force the market to value these blocks at a certain price, if at all.

Also for the sake of community unity, and to prevent undesirable chain splits or other negative impacts on the continued functioning of the electronic cash system, I would recommend all non-mining nodes to remain neutral by accepting blocks whether they contribute to the fund or not. We must ensure the cartel can indeed fall apart when it ceases to support the commons, and thus it would be foolish to take any actions that artificially stabilise the naturally unstable cartel.

$ 5.63
1 month ago

Nice article, I have several questions

1- ¿Could it affect the price of bch in the market?

2-¿For the date of May and halving would occur, how is it estimated to affect the percentage proposed here?

3-¿Could it happen that some amateur miners in some countries of the world decide not to undermine bch since May?

4-¿How could we have access to the audit in case something bad happens?

5-Does it have any difficulty setting up miners like that? What failures could be present and how would it affect the percentage?

Everything that supports and helps the adoption and growth of Bitcoin Cash I support it 100%

$ 0.00
1 month ago

to start, thank you for your incredible contributions to a wonderful community that I have only just recently re-joined. amazing stuff happing on the BCH side of crypto, and can only hope that it continues long into the future..

overall, i agree with the entire proposal .. couple things though:

What people calling it a tax have a problem with the compulsory contribution. So, is it a compulsory contribution? I would argue that it is not.

i won't argue about whether this is right or wrong. however, I'd like to suggest that your team poll as many non-cartel BCH miners as you can, and ask them if they feel "obligated" or not. if the (major) majority respond "yes, this is compulsory", would that possibly change your mind?

crazy idea .. why not try it "first" without the Godfather-style offer that no one can refuse, and then try it with .. compare and contrast .. the benefit here is that you FIRST TEST the capacity for the MINERS to do the right thing and support the mining pools who are supporting the community's best developers. (currently, this proposal "unfairly" assumes that no one is willing to do the right thing, except for the cartel's participants)

i strongly believe that in POW crypto it should be the miners and NOT the pools that have the power to make these sorts of decisions. Considering this is being pitched as a let's just try and see (since no one has been able to agree in years?), why immediately jump to such a strong-arm tactic of orphaning blocks from non-cartel participants?


and then what's up what with that Hong Kong company? who's idea was that?!? i'm assuming monthly payments will be made by "bank check" from the company's HSBC account? (whatever)


as this proposal still has many months before implementation, i'm extremely confident that these issues/concerns will get resolved though meaningful "public/transparent" discussions. in the end, after reading for hours (and hours) of commentary, there is no one that objects to BCH developers getting all the funding needed to satisfy all their wants and needs. BUT NOBODY WANTS TO SEE BLOCKSTREAM 2.0, and that's the real FEAR...

Cheers and best of luck to ALL BCH teams in 2020!

$ 0.87
1 month ago

Is it possible to setup the Cartel on the blockchain itself, and the miners who contributed to the cartel can vote on how the fund is distributed? Something like a multi-sig wallet or a smart contract?

$ 0.10
1 month ago

Is it possible to setup the Cartel on the blockchain itself, and the miners who contributed to the cartel can vote on how the fund is distributed?

please take a look at DASH. They're doing pretty much exactly that. Imo it's not going very well.

$ 0.10
3 weeks ago

The miners are paying it, not end users. Everyone benefits from developers work. They should be paid. Voluntary donations do not work, too many free loaders, and opens the door to blockstreams. This plan is going to give BCH a huge boost and that’s what core trolls are afraid of.

$ 0.05
1 month ago

I think this funding proposal is hated by the anti-p2p-cash movement. They have brought out all hands to fight this with lies and deceptions and real concerns we need to be careful about. I believe there is a massive (troll?) campaign to try to vilify the 'unknown HK corporation' planned for receiving the funds. I believe their are many liars claiming it is just a scam to steal the funds. I assume the big players have a clue about how to handle these funds they are collecting for us and can be trusted to do what they think is good for BCH. The anti-BCH forces hate that this proposal may succeed in supporting accelerated BCH development. They fear we will be able to fully scale for worldwide adoption before they can stop us.

I was totally with you until you ended with 'let me control who gets the money'. I think your team should get most of the money, but, you cannot be one of 3 friends who has the job of determining the distribution of funding. The conflict of interest is mind boggling. Suggesting it makes me concerned since I can't imagine you are not aware of how terrible that idea is. Of course you and all those you mentioned should be advising the decisionmaker(s).

Edit: Personally, I would prefer the funding distribution be determined before the funds become available and have an automated payment system to the recipients so the funds never sit in an HK corporate wallet or bank since that would be a single point of failure located in a dangerous location. Also, I think having a donation address for supporters that would add to the funding and get instantly divided and distributed in the same proportions would be a nice touch.

$ 0.25
1 month ago

I'd like to see a proposal system. Let's have some guidelines, competition & metrics.

$ 0.25
1 month ago

The "tax" narrative smells like propaganda, who else would improperly use an incendiary word in this context like that?

$ 0.00
1 month ago

My biggest concern here is this sentence: "The miners who decided to propose the plan all have proven that they care about the success of Bitcoin Cash." I want more than someone's word that this is truly the case. I'd love to somehow have confidence that they truly have skin in the game.

$ 0.10
1 month ago

They have been mining BCH since Inception. That's skin in the game.

$ 0.00
3 weeks ago

Each of the four guys who signed it have been instrumental to Bitcoin Cash multiple times over. I don't think BCH could have been as successful as it has been without Bitmain and Bitcoin.com throwing their weight behind it. Haipo Yang (ViaBTC) contributed the initial hashrate to fork BCH and mined the first BCH block. His exchange was also the first to offer fork futures trading on it, which gave it a price before it existed. Jiang Zhuo'er has been writing pro-big block articles for years and has used his own hashrate to put his money where his mouth his. Much of the hashrate that came over from BTC to defend BCH during Craig's hash war was from him. I think Roger's support of BCH speaks for itself.

You don't have to take anyone's word for it, these guys have demonstrated through their actions over the years that they are very committed to BCH.

$ 1.02
1 month ago

Can't you see how un-Bitcoin this is? P2P money is supposed to be an impartial platform, not a system of men. You don't go hard-coding 12.5% of the new money to go to somebody's wallet, NO MATTER HOW awesome and committed they are.

Amaury should know this better than anyone. The fact that he accepts this idea, and proposes himself as the controller, means he has totally lost the plot of decentralized money.

Jiang's article randomly decided to praise the great Deng Xioping, leader of China. BCH is becoming exactly like that!

You are off in the weeds now.

$ 10.00
1 month ago

They asked myself several times to implement such a measure in Bitcoin ABC directly

This option actually seems like the most reasonable to me. Why shouldn't you guys get paid for the software you created that the miners use to mine blocks?

I'm also curious to know if it would be technically possible for the client to direct all transaction fees to the dev team that maintains the client? I think it's a small reward that the miners would be willing to give up.

Of all groups, it seems like infrastructure dev teams have the most to gain or lose with regard to adoption and usage. The miners don't have to care. If the coin falls out of favor then they just mine something else. You guys should be rewarded to the degree that the protocol is used. More users, more transactions, more reward for the people who make the protocol so popular and usable.

$ 0.10
1 month ago

From a libertarian side, I must say this all is ethic but the part where some party unilaterally decided to set the fund management company at Honk Kong. Wasn't there any other country with less political instability? I don't know, maybe Iran.

$ 0.05
1 month ago

SE MAMO!! xDD

$ 0.00
1 month ago
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