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On Changing the Economic Policy of Bitcoin Cash

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Avatar for jonald_fyookball
Written by   195
8 months ago

I had opined that ramming the IFP through without community support would surely be a mistake, and I think that much is clear. The next question is "Is the IFP a potentially good idea, even under the best of conditions?" The answer to that question seems to depend on context and culture.

Economic Policy

Currently, in Bitcoin (and Bitcoin Cash), 100% of the coinbase rewards (and fees) go to the miner who solved the block. Combined with a fixed and predictable issuance schedule that culminates in a maximum supply of ~21M coins, this forms an "economic policy" that governs us via broad support and consensus.

Of course, there is also the issue of having fast, cheap, reliable transactions. BTC's failure to increase the maximum blocksize changed the economic policy because block space was allowed to become scarce. This is tangential to the discussion but it's a good example of economic policy changing in general.

In the case of IFP, we now have a new group (developers) who is the beneficiary of new coins being issued, and there is a whole new dynamic where miners now must also decide how to distribute the coinbase. Whether this is good or not, it should be acknowledged that these changes are not trivial, and may possibly have far reaching implications and consequences.

Changes to economic policy are not necessarily bad, but they should be recognized for what they are. It can certainly be argued that there is great value in not changing the policy.

Cultural Differences Between 2017, 2019, and 2020

In 2017, when BCH launched, the culture was about Bitcoin Cash being "the legitimate continuation of the Bitcoin project" and "the best money the world has ever seen" and even "Bitcoin Cash is the real Bitcoin."

By 2019, bear market blues had set in with a seemingly never ending downtrend, and the sobering reality that we're a 3% chain. Claims of being "the real bitcoin" were starting to sound a bit silly, or at least it was recognized to be an ineffective slogan.

I admit that I succumbed to this negative culture shift. It felt like something needed to be done... anything to help Bitcoin Cash compete in the face of overwhelming opposition from the media and competitors such as BTC and BSV.

But sentiment changes quickly. Now, we're in 2020, and the bulls are back in town. BCH price has doubled. Finally, the fruits of our labor are just starting now to ripen. Adoption work is hard... but we're seeing new meetups, new faces involved... Bitcoin Cash is being recognized for leading privacy efforts in UTXO blockchains. And many other positive developments.

Maybe we really are the real bitcoin after all?

The question of whether its appropriate to change the economic policy of Bitcoin Cash depends on our identity. How do we see ourselves? What are our values and principles?

No Man's Land

Starting a new coin with a baked-in developer funding into the protocol seems to be less problematic than the IFP. There's the economic policy itself, and then there's the stability and predictability of it. If a dev team gets funding from the protocol and it's always been that way since the start of the coin, then it's predictable. Or maybe, in a new coin, a dev team could get 10% the first year, then 9%, etc. This would at least be set in stone in the same way that other coin parameters are set.

By contrast, "making it up as we go every 6 months" seems a bit dubious. Bitcoin BTC is big enough that it's more viable for businesss and investors to voluntarily subsidize development. Bitcoin Cash is much smaller, so it doesn't have those advantages. Yet it is not a new coin either, that can take advantage of a carefully planned and prescribed bootstrapping mechanism. As such, it is unfortunately stuck in "no mans land" as a consequence. And this is part of what has brought us to the current juncture and debate.

The Issues Are Not Just Ideological

Perhaps I was a bit naive in thinking that "lets just do it for 6 months!" was a sound approach. I may have been personally resolute in sticking to that, but almost immediately, others began to form opinions that we should do it for longer than 6 months. And this is a manifestation of the line in the sand being crossed. Once the coinbase-distribution aspect of our economic policy is open to change, there doesn't seem to be a good way to cap the lid (other than possibly becoming a majority SHA-256 chain).

Humans will always let you down. Bitcoin is great because it removes a lot of the human factor from economics. Governance in Bitcoin may never be solved, but giving more control to humans via voting to change economic policy seems to be possibly going in the wrong direction.

When the IFP was first being debated, I made some remarks to the effect of "people shouldn't be so idealistic. So what if it's not exactly your ideal vision of what Bitcoin should be? This can help us compete." But, if we experienced this much drama and politics in just 3 days since ABC announced their inclusion of IFP in the node, just imagine what will happen in the next 5 to 10 years.

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Avatar for jonald_fyookball
Written by   195
8 months ago
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Comments

The BCH market is bearish and you have made it more bearish. BCH needs more funds for marketing rather than development now. We implemented CTOR and Shnorr signatures, who is using them now? I mean in mass circulation? The average number of transactions in a block is still 300 tx/block. I do not argue that these are cool things, but the average user does not use them. He still enjoys BTC and ETH. Now the BCH network is only 5% of the BTC network. If you tax the miners with 5% tax, they will all run off to the BTC network. Miners do not need to be driven out of the network, they need to be attracted on the contrary by their power. If you continue to insist on IFP then our network will be 1% of BTC. As long as we have less power than BTC, we are a minority chain. Adoption first.

$ 0.06
8 months ago

BCH needs more funds for marketing rather than development now.

I know I'm taking this out of context, but I guess once the line in the sand is crossed, pandorra's box is open and the stuff in it up for grabs ;-)

$ 0.00
8 months ago

I believe having the ability to accept viral growth should come before attempting to achieve it. I believe the ability to scale BCH should be our top priority as we do not know when the viral growth surge may attempt to occur. If it tries to happen before we are ready it could be very bad for BCH and set us back years again.

$ 0.00
8 months ago

There's the economic policy itself, and then there's the stability and predictability of it.

And this is a manifestation of the line in the sand being crossed.

you speak my heart

possibly becoming a majority SHA-256 chain

that's what we all want, isn't it? That's what we can unite behind?

One thing is for sure: we're not going to get that by sacrificing economic predictability and crossing lines left and right.

$ 0.02
8 months ago

"The economic policy itself, and then there's the stability and predictability of it (...) By contrast, "making it up as we go every 6 months" seems a bit dubious"

Pretty much this.

Besides that I believe that another community split at this point in time will severely harm the remaining prospects of BCH to become "global P2P cash" (right now still a Top 5 Coin, but forking into ever smaller communities is a surefire way to get lose that status and become at some point some "random" Altcoin like Dash, Digibyte or whatever else squirms around there on the lower ranks of CMC), this argument above is another reason why fiddling around with the fundamentals of the economic/monetary policy of BCH can undermine trust in the system.

It is indeed a slippery slope. Once you have "broken" the taboo to adjust it to your likings, there is (and that is unfortunately the lesson we have to take from monetary history) nothing holding you back to do just "this one more change" due to some "exceptional circumstances" etc.

And then we have not gained anything.

"Humans will always let you down."

$ 0.00
8 months ago

Of course a community split would be terrible. Not letting that happen is top priority. A coin fork is not the same thing and we should not let bullies scare us with that empty threat. Of course, if they can also split the community, it is not an empty threat.

The slippery slope argument is for chains that do not do upgrades to achieve the dream of Bitcoin. We have already exercised that power. Anti-BCH forces use that argument every time we try to make a change that is good for BCH. They also try to fool us into thinking this time is the first time we "risked" doing that.

Miners and developers working together is a superpower that must be very carefully exercised. When they are doing something good for BCH, it is an upgrade. So far, all the upgrades to BCH were miners and developer doing what they thought was good for BCH. I believe the same is true this time. The presentation to the community, the current implementation plan and some important details have been bungled, but, I still think the plan is good for BCH and well intended by the miners and ABC. The massive attacks usually claim evil intent by the developers or miners or both. I see little evidence of evil intent by the pro-donation miners or pro-funding developers.

This pisses of the massive BTC-miner community, but, unless we do not have enough miners to do this voluntarily (as I discuss elsewhere), I consider this a permissionless situation and do not think they should be able to tell BCH miners who they can or can't send the rewards they earned to.

$ 0.10
8 months ago

"Maybe we really are the real bitcoin after all?"

How sad that you were starting to, maybe, doubt this. All the coins were falling. We have not even solved scaling yet. It is early days. BCH is still the only Bitcoin project seriously working to become peer-to-peer electronic cash for the world's people. We have not achieved the dream yet, but, BCH is currently the best chance for a Bitcoin to achieve it. Were you starting to think BTC might be "the real Bitcoin"? I hope not.

Anyway, we need development funding to become peer-to-peer electronic cash for the world's people before we take too long and it is too late. I do not care if ABC does it, but, I believe we need scaling ASAP. We should not take years longer to get that figured out. If we do, I believe something else will fill the worlds need for Bitcoin before we do. The dark powers opposed to any real Bitcoin hope they can delay us that long.

$ 0.00
8 months ago

"Maybe we really are the real bitcoin after all?"

How sad that you were starting to, maybe, doubt this.

When hope dies, everything dies.

$ 0.05
8 months ago

"real bitcoin" is a subjective label in any case.

$ 0.00
8 months ago

I think the real bitcoin is defined in the white paper (p2p electronic cash). It is not store of value (BTC) or filesystem (BSV)

$ 0.10
8 months ago

In my opinion, real Bitcoin is the UTXO based POW blockchain. There are many chains that are real Bitcoin.

$ 0.00
3 months ago

"... In the case of IFP, we now have a new group (developers) who is the beneficiary of new coins being issued, and there is a whole new dynamic where miners now must also decide how to distribute the coinbase. ..."

IMO, they are newly minted coins, but, they are not different coins from the ones that were always intended to be issued. The issuance is not something new, just the recipient. I bet Mr Fyookball realizes this, but, I mention it because there might be confusion among those opposed to the proposals. These are coins that have been earned by BCH miners in the normal course of mining as always. If there is no change, the coins will go to the miners.

I agree the miners that earned the coins and are donating some of them to developers should be allowed to decide where their donated coins get sent. I think they deserve that right because it is their coins getting donated. I do not agree "miners now must also decide how to distribute" the coin rewards. If they choose to let someone else (or a vote or committee) make that complicated and politically-difficult decision, I think they have that right as well. Maybe it seems like I am splitting hairs and them choosing someone to do it for them is still miners making a 'decision on how to distribute' them. I think it could be an important distinction to be aware of.

Anyway, in my view this is BCH-miners choosing to donate coins they have earned to BCH developers. If the miners that earned the coins get to decide where they go, it is just an automated method for donating their property and not a change to BCH economic policy. I assume the mining rewards already go to an address provided by the miner and I do not think this needs to change that. My argument assumes there are enough BCH-miners willing to mine BCH and donate to make it 100% voluntary for BCH miners.

If BCH-miners are forced to donate, then my argument falls apart in many ways. So, I have been trying to find out if there are enough miners (hashrate) that support this donation idea that could and would be willing to do all of the BCH mining. If we had 100% support among BCH-miners (which is a small amount of total sha-256 mining), I would say that was enough support. I suspect there are plenty of pro-BCH miners that we could easily get to this level of support. Of course the anti-funding forces will say we have little or no support.

$ 0.10
8 months ago

There are many things wrong with IFP but as you kinda mentioned, it's just a reason for others to rightfully call BCH "Not Bitcoin".

Once a portion of block reward is up for "sale" there are gonna be lots of people in the future lining up to get a piece of it with all sorts of proposals. It kills the whole purpose of Bitcoin which is supposed to be pro business. So startups instead of actually thinking about making a product that customers pay for, are gonna plan for the easy money which is the block reward.

Even if it happens for only 6 months, for years people are gonna refer to this event as evidence that their crappy idea deserves another round of 6 months. Making it a great target for future Blockstream-like companies to infiltrate the community and run campaigns for it. Who don't like easy money?

$ 0.00
3 months ago