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Little Known (But Important!) Facts About the Mining Plan

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The infrastructure funding plan released by Jiang Zhuoer is potentially great news for Bitcoin Cash but also has come with a few points of contention as well as some misunderstandings, both of which I hope to clear up here.

First, some background.  Prominent Chinese mining leaders have been in favor of funding developers from coinbase rewards almost since the beginning of Bitcoin Cash.  As Amaury Sechet explained in his article, Bitcoin ABC (the lead implementation of Bitcoin Cash) could not have unilaterally decided to fund themselves as it would have been political suicide, even though this had been requested before.

Instead, the formal announcement and proposal had to come from the mining interests of the ecosystem to avoid a clear conflict of interest.  And that is what finally happened. However, this is not to say there hasn’t been at least some (limited) communication in recent weeks about this idea between the Chinese miners and a few Bitcoin Cash influencers, including myself.

I was aware that this announcement would come before the general public knew about it, and I support it.  I will explain all the reasons for that, but I also want to communicate the fact that, in the spirit of extreme ownership, I take responsibility for “pushing” and encouraging this.  It is because of that, that I don’t take it lightly when you, my cherished colleagues, have any issues with what is being proposed.  Let’s dig in.

A Proposal from Miners

The BCH miners (whose names are on the proposal) are not people who will act unilaterally and force protocol changes on our community.  Therefore the announcement is, strictly speaking, only a proposal. If we all hated it, we could theoretically reject it.  

But it is also no secret that Amaury (lead developer of Bitcoin ABC) has been explaining for a long time that we could implement our roadmap faster with more engineers.  He also explained, in a speech, why infrastructure funding is so important, and I generally agree.

There are also a number of other positive aspects of the proposal that have merit also.  So, on the whole, if the miners want it, if the lead dev team wants it, and if there are additional reasons to support it, then we should seriously consider accepting and implementing the proposal.

Tax?

If a portion of coinbase rewards are diverted from miners and given to developers, should this be viewed as a tax on miners?  This is a question that can be looked at from many different angles.  

From the perspective of miners: whenever you remove rewards from the system, the immediate effect is a drop in revenue and profits.  But then something interesting happens: The weakest miners will drop off the network, which slows the blocks, which then lowers the difficulty, leading to more blocks found for the remaining miners.  This happens naturally in the long run with each halvening, leading to a fee-based security model.

Things become slightly more complicated in the multi-chain scenario, and this seems to be not well understood.  The reduced revenue from BCH rewards causes miners to switch to BTC, which increases BTC difficulty and reduces BCH difficulty.   For switch-miners or BTC miners, the reduction in revenue is tiny compared to the overall hashrate. For the BCH-only miner, he will find more blocks and achieve essentially the same profitability, even without switch mining.  So, this is a major benefit for the BCH-only miner.

There have been different arguments from different people on why it’s not a tax to begin with, but even if you believe it is, it is nearly fully absorbed by the greater SHA-256 ecosystem, as mentioned in the proposal.

Smart Move or Shitcoin Move?

A few people have expressed fear and concern that this plan might turn BCH into a shitcoin.  I’ll tell you why I think that’s an unwarranted fear, but let me speak to these genuine concerns.

Early on, in our short BCH history, some of the mining leaders shared the idea with me that they wanted to copy what DASH was doing and bake some dev funding into the protocol.  And I really didn’t like that idea at all.

Now, why didn’t I like it?  Two reasons. First, we are Bitcoin Cash, not DASH.  We share an ethos that we should continue the Bitcoin project as peer-to-peer electronic cash for the world, and to that end, I don’t think we should monkey with the Bitcoin protocol and especially the Bitcoin economic incentive system too much. 

Secondly, in the long run, I don’t see how corruption can be avoided in this model.  The question of “who decides who to pay” is an evergreen conundrum.  (DASH may think they solved it with masternode voting but that’s out of the scope of this article).

So what changed?  Why do I support this mining plan now?

There’s a few reasons.  The biggest thing for me, the lynchpin, is that this is a 6-month plan.  As I mentioned, I don’t believe dev funding via the protocol is a good idea in the long run, or on a permanent basis.  A lot less can go wrong in a period of 6 months.  It can be viewed as an experiment: let’s exchange a bit of hash for some money that we can inject into the ecosystem.  (It especially makes sense given our deep reorg protection plus the loyalty of the SHA-256 miners.)

I think one of the emerging characteristics of our community is our practicality.  And I give credit to Amaury here...things like fixing the DAA, adding reorg protection to get us through the hashwar, pushing for cashaddr, etc.  I view this plan as being in the same vein: extremely practical in taking advantage of the lopsided hashrate situation, and solving one of our biggest problems almost for free.

In addition, it is no longer 2017.  It is 2020 and we have to acknowledge this is a new time and a different context.  We are no longer trying to be “Bitcoin” or “the real Bitcoin”. We are Bitcoin Cash.  What am I talking about? Well, for starters we are a 3-4% chain and there’s 5000 coins out there.  As Jiang Zhuoer said, we are too small. We need to get bigger before we worry about things like “decentralization” and “purity of protocol”.  Another example of practical thinking.

Infrastructure Funding

We need to solve our funding issues and so far, everything else we’ve tried hasn’t gone great.  What are the different ways to fund infrastructure?

One is the Blockstream model obviously.  This is not necessarily a bad model if the company funding the protocol is actually interested in building the product you want (in our case, p2p cash).  However, I don’t see anyone rushing to pay BCH $76M. A variation on this model is the “whale” model. I don’t see whales giving millions to BCH either, (although one modest hero did give plenty in the hashwar, he knows who he is.)

Another model is the “hodlers incentive” aka crowdsourcing donations.  This works to a limited extent but probably not enough to seriously fund infrastructure.  In general, it works better in the single chain scenario, and overall not that great on a 3% chain in a bear market.

Other attempts/ideas to fund infrastructure via mining haven’t worked.  I’ve seen suggestions involving everything from hashrate voting to p2pool, to covenants, etc.  No disrespect to the great developers who come up with those ideas, but the reality is that all of those things are too complicated to have a good chance of working in practice, especially in the near term.

That’s not my opinion, it's a fact.  More than one team has tried to implement a miner based funding scheme and failed due to operational complexities.  This is why Jiang is saying “No Debate” in his announcement. It’s time to cut the nonsense and just do what works. KEEP IT SIMPLE.

Also, doing it without orphaning will fail because the contributions from individual miners will be meager, and pools cannot do this at scale because they will quickly become uncompetitive.

A 6-month Plan

At least one person has mentioned that they don’t actually believe Bitcoin Cash would stop at 6 months.  They believe that once we take the dev money once, it would just keep repeating. This is a valid concern.

And of course, there is absolutely no guarantee that this won’t happen.  As I always like to say. “This is crypto.” People can choose to run whatever code they want.  This is one of the perils of hard-forking every 6 months. We need to KEEP making consistently good decisions about the direction of the protocol.

Driving off the main path and down a side street that includes infrastructure funding is not without the risk of temptation and corruption.  If we choose to go down this road, we do so with the full knowledge of this. There is risk to go with the reward.  

That said, I can give you 2 of my own strong opinions about this:

1.  We absolutely, positively MUST include code in the node implementation that shuts off the donations after 6 months, so it is the default behavior of the software.

2. As far as I can see into the future at this time, we should not, as a community, decide to repeat the maneuver on the subsequent semester, if for no other reason than to avoid setting a bad precedent.

And also it is the miners responsibility to keep devs in check and balance the needs of the ecosystem.

Execution of the Plan is In Our Hands

This has been the biggest misunderstanding about the plan, and centers around the mysterious “Hong Kong corporation”.  I happen to know that this corporation is in place as a simple matter of responsibly setting up a legal entity that can receive income.  It is not there to lord over the Bitcoin Cash protocol, as many people have unfortunately speculated.

In fact, everything about managing and executing this plan falls to our community.  The miners do not want to control or micromanage anything here. Everything we want in a plan: transparency, fairness, etc is in our hands.

In practice, this will be implemented in a version of Bitcoin ABC as part of the next semi-annual protocol upgrade.  (Because it is happening at the same time as other protocol changes, it becomes a de-facto hard-fork rather than a soft-fork as has been reported in the media.)

I should point out that the proposal mentions this is not a protocol change, is not entirely accurate.  Although it may not be a permanent change, it affects the protocol in the short term. But that is a good thing.  This handles the issue of the unknown miners.

Some have expressed concern that they don’t like this just being stuffed into the ABC code, but there doesn’t seem to be a better way to do it.  Leaving the orphaning up to the miners as a separate process would be a terrible idea, because it would open the door to other kinds of orphaning.

The Details

If the implementation and execution is up to us, how exactly should we roll this out?  Amaury Sechet had one idea in his article, and others have made additional suggestions on how this could be done.  The aim is to provide both fairness in terms of who controls the money, as well as accountability/visibility for the entire community.

One point is that we will have to decide soon how this should be executed, with the code cut-off rapidly approaching.  

I’m excited to see how the next steps of this development will play out, and overall I remain optimistic and confident that encouraging this plan is a good move for Bitcoin Cash.  In our journey, we won’t always make the right moves, but we’ll always keep moving forward and (hopefully) keep learning from our mistakes and correcting course.

I understand that some in our community may still have reservations about this bold move, to which I would say this: Ideology and principles are important, but it may be even more important to stubbornly focus on our goal of onboarding 100M users onto BCH.  In chess, sometimes you are forced to play a move that doesn't fit your style, but it is what the position calls for. 

With all of the recent burgeoning adoption and technical improvements to Bitcoin Cash, the infrastructure plan can help us powerfully continue in 2020 in our mission to bring peer-to-peer electronic cash to the world.

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Comments

Well, for starters we are a 3-4% chain and there’s 5000 coins out there. As Jiang Zhuoer said, we are too small. We need to get bigger before we worry about things like “decentralization” and “purity of protocol”. Another example of practical thinking.

Damn! if this ain't the best argument I've heard yet in favor of supporting this proposal (and the way it was proposed) .. as a n00b, I had no idea BCH was so small compared to BTC (i hardly ever look at prices) .. I can more "feel" why this decision was made the way it was, in terms of focusing on the "priorities" of BCH's overall health .. i get it now

(sigh) but i just don't get why this Hong Kong Company couldn't have been a DAO? Seems awfully lazy (convenient) on someone's part..

contract HongKongCo {
    function devPayout() public {
        ...
        return true; 
    }
}

there ya' go, I got u started...

$ 0.00
8 months ago

We need to get bigger before we worry about things like “decentralization” and “purity of protocol”

if this ain't the best argument

No, this is not a good argument. Selling those ideals for some potential growth is pulling the fundamentals from the project and it will backfire. Those ideals are what unites communities behind their respective coins. If you give up the ideals (and more importantly demonstrate you're willing and able to give those up), you basically give up the project.

$ 2.00
8 months ago

Those ideals are what unites communities behind their respective coins.

I DO NOT disagree with you. I'm conflicted with the same thoughts.

My "modified" argument, is that by forcing BCH to do EVERYTHING, you may inhibit "practical/natural/organic" growth of the community and ecosystem.

I don't think anyone has a problem using "modern" technological tools to improve the success of a project; so I don't see why NOT include other cryptos under the umbrella of "modern" technology. (that's just my thought)

Take or example the resurgence of Lighthouse as a better developer funding idea.

I agree with this notion of crowdfunding BCH developers OVER the "tax"; however, after spending a fair amount of time reviewing the Lighthouse code (this included learning CashScript and Spedn), it's just NOT practical AT ALL. There are too many missing features to build a "real" crowdfunding platform with BCH (in its current state).

I suggest the use of Ethereum (one because I'm very well versed in Solidity), but also because I "strongly" believe that Ethereum DOES NOT compete with BCH. It's only for THIS reason, that I suggest it be utilized, and ONLY in areas where BCH underperforms.

Thanks for your feedback. These are the things I most want to hear from the community. Really helps me better understand which direction I need to work towards.

$ 0.00
8 months ago

A point that came up here and I thought I should ask you the same question:

Did you speak out publicly anywhere against his suggestion to appoint developers (himself and yourself, and another ABC developer) as custodians of the collected funds via a multi-signature scheme?

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

$ 1.00
User's avatar btcfork
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8 months ago

It appears to me this controversy about funding BCH developers is being used in an attempt to divide the Bitcoin (BCH) community again. The trolls and anti-BCH side are pretending they represent the majority of the community and they are posting the most comments. This is how small blockers were able to fool the real Bitcoin community into thinking the small blockers were the majority of our community. Many still think the small-block position had a majority of community support back then (and now, lol). BSV tried it also but failed because we can now see this attack vector better due to past experiences. Don't fall for it. The real community sees that miners supporting BCH development is a great thing.

$ 1.71
8 months ago

Totally agree.

$ 0.00
8 months ago

It is sad that you agree with such a horrible plan. You are the beneficiary of this Fund, but what about the decentralization?

$ 5.01
8 months ago

I support miners who support BCH. I support developers who support BCH.

$ 0.00
8 months ago

Bitcoin Cash is Bitcoin Cash! Enough of teying to be the "real bitcoin" like the bsv tards keep chanting.

That ship has sailed. Time for action!

$ 0.00
8 months ago

Wrong assumptions lead to wrong conclusions.:

  • "BCH developers are starving" = false, most devs are very happy to develop for $BCH and do it mostly out of love, or to create value for their stash, or have other business depending on it. Same for most spokespeople and marketeers.

  • "BCH development is slow" = false, $BCH is innovating rapidly compared to competition

  • "Donation based business model does not work" = false, 800 BCH raised with just 1 simple fundraise requiring little effort

$ 1.00
8 months ago

I agree with your reasons for not liking Dash. We should not monkey with the protocol. Yet here we are, doing precisely that. If we have fundamental objections against how Dash works, why are we experimenting with a similar method with similar disadvantages?

You proceed answering this question with practical reasons. Only practical reasons. But how can practical reasons possibly address our fundamental objections to the method?

We need to get bigger before we worry about things like “decentralization” and “purity of protocol”.

This cannot possibly work. To get bigger, we must gradually improve decentralisation and gradually improve the protocol. We do not have to do everything at once and are free to set priorities here.

But conversely, if we move in the opposite direction, we will get smaller. If we destroy decentralisation and/or the protocol completely, then this will destroy Bitcoin Cash completely. This is a serious opportunity to commit such suicide, so we must be extremely careful here.

"I look back to the times we fought about 1-minute blocks and avalanche vs storm and ctor and 25 unconfirmed limits, they all look silly now. none of them really matters. none of them." ~ imaginary_username

And also it is the miners responsibility to keep devs in check and balance the needs of the ecosystem.

And also it is the users' responsibility to keep miners in check and protect the peer-to-peer electronic cash nature of our system.

I should point out that the proposal mentions this is not a protocol change, is not entirely accurate. [...] Leaving the orphaning up to the miners as a separate process would be a terrible idea, because it would open the door to other kinds of orphaning.

Here we are going down the slippery slope at full speed. This was supposed to be a miner's initiative, and this was used as the primary justification that this is all ethical. The orphaning plan is the single central element of the plan's execution. And here we have the proposal to let developers, and users who run their nodes, execute this element instead of miners. The result is that the miners will do absolutely nothing and the developers/users are doing everything.

If executed this way, this is full-blown permissioned mining. This is unacceptable. The only chance to make the proposal remotely ethical is if a mining majority decides it via Nakamoto Consensus. To let the miners decide, it is essential that we as users must accept any non-donating blocks as equally valid as donating blocks.

Ideology and principles are important, but it may be even more important to stubbornly focus on our goal of onboarding 100M users onto BCH.

We were supposed to fight for adoption of a peer-to-peer electronic cash system. There is no point in onboarding 100M users to an electronic cash system if it is not peer-to-peer. These users will also simply refuse to board if it does not have the reputation of being peer-to-peer. This funding plan threatens that reputation.

$ 22.50
8 months ago

I agree entirely.

$ 0.02
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8 months ago

And also it is the users' responsibility to keep miners in check and protect the peer-to-peer electronic cash nature of our system.

users as in BCH holders right?

$ 0.00
8 months ago

Yes. Users/holders are the people assigning value to block rewards of miners.

In the beginning, all users were miners. The current distinction between miners and users is a result of specialisation, facilitated by markets enabling miners and users to trade block rewards. This way users efficiently delegated their mining task to specialised miners. These miners must still produce block rewards in a way users/holders deem acceptable, otherwise they cannot sell them.

$ 0.00
8 months ago

in this case i agree, we need a platform for the hodlers to vote with their coins

$ 0.00
8 months ago

The proper way to do that would be through a futures market, such as previously existed for the BTC-BCH split and the BCH-BSV split. However, I think I would prefer if miners settle this conflict by themselves, to avoid fracturing the user community and damaging our network effect by risking another permanent chain split.

$ 0.00
8 months ago

it might be hard to design futures markets for every possible decision. i predict that simple coin voting needs to be a thing.

$ 0.00
8 months ago

I am supportive of a development fund. I think the tertiary stakeholder (developers) in the bitcoin world has been largely left behind so far. They should be taken care of and have a better way of sustaining themself because their software is at the heart of the bitcoin eco-system. What is your opinion about a direct funding system like tipping? https://read.cash/@nghiacc/tipping-system-to-bch-developers-de26dded

$ 0.00
8 months ago

I say keep it simple and uncontroversial by funding these devs in a conventional style. These business entities championing Bitcoin Cash should just go ahead and fund the devs OUT OF THEIR OWN COLLECTIVE POCKETS. $500K - $1M over a year or two would be peanuts for them.

So what if other smaller, non-paying miners get to benefit? They are still the biggest beneficiaries of any improvements to the BCH ecosystem because of the vast BCH assets they own. Plus, in funding out of their own pockets, people will be far less justified in complaining about what will surely be the tremendous influence that they'd wield on what the devs decide to work on.

$ 6.60
8 months ago

I say keep it simple and uncontroversial by funding these devs in a conventional style.

I'm with you. Hopefully some whales and other holders are waking up to the fact that they need to put some money on the table.

$ 0.00
8 months ago
  1. "It's time to get real [about the "6 months"]

Even a hard stop after 6 months would be detrimental. It's just NOT going to happen once this gets started, unless something with this HK corp is catastrophically mismanaged or external circumstances (regulator, politicians) intervene to tear it down.

The lack of realism around this timeframe is disappointing.

  1. "In practice, this will be implemented in a version of Bitcoin ABC as part of the next semi-annual protocol upgrade. (Because it is happening at the same time as other protocol changes, it becomes a de-facto hard-fork rather than a soft-fork as has been reported in the media.)"

It does not need to be implemented as default rules, but can be such that miners and others explicitly need to activate it.

Just because it is included together with other HF changes, does not make any new rules related to how coinbases can be spent, not a SF. It becomes an upgrade with mixed changes (hard and soft forks).

  1. "Leaving the orphaning up to the miners as a separate process would be a terrible idea, because it would open the door to other kinds of orphaning."

Miners can already orphan at any time. What this proposal does, is open the door either way to retaliatory orphaning aka Hash War II , not necessarily conducted on BCH chain only. In fact, the proposal raises a lot more questions than have been addressed so far, including in the AMA, and your post is unable to complete them reliably.

$ 6.51
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8 months ago