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Seven Things That Should Never Change in Bitcoin Cash

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Avatar for jonald_fyookball
Written by   202
2 years ago

The Bitcoin experiment has proven to be challenging. First we had BTC, but the Bitcoin Core developers refused to raise the blocksize, and the community split into BTC and BCH.

After the BTC/BCH split, BCH continued but a segment of the community forked off during the BCH/BSV split. Although the reasons the BSVers gave for this second split were largely fabricated and illogical, some felt that BCH was too permissive with protocol changes, and those concerns came to fruition during the recent IFP debacle.

In order to become widely used peer-to-peer electronic cash, and become the best money in the world, Bitcoin Cash must walk a straight and narrow path. It must avoid protocol changes that would hurt the coin or split the community, and at the same time be open to making changes that are necessary to achieve its mission.

Although this sounds simple enough, the problem in Bitcoin has been and always will be related to one thing: humans. Bitcoin is software, and people have to decide what goes in the software, and which software to run. So, what to do?

Although it may be tempting to make a declaration of "freeze the protocol!", this would be closing the door on any future innovations, including those critical for scaling the blockchain. Plus, there is no guarantee that such a freeze mandate would be respected in the future.

If humans are the problem, then education (leading to greater awareness) is the answer. Ideas shape society, and key principles can serve as foundational boundaries to help us decide what aspects of Bitcoin are sacred, and which can be modified. With this in mind, I have identified seven things which I think should never be changed.

1. The 21,000,000 Coin Limit

The fixed supply in Bitcoin is something just about everyone agrees with, and is one of the main points of attraction for investors. Bitcoin was created to do away with fickle monetary policies, and instead offers something predictable, with a known and limited supply.

Money is supposed to be both a medium of exchange (MoE) and a store of value (SoV). The two aspects are intertwined: Because it can be used as a MoE, it is valuable, and because it stores value, it can operate as a MoE. But, in order to be valuable, it must be both useful and scarce.

Occasionally, some may suggest that this limit be increased in order to incentivize more security, but this has serious downsides. It weakens the scarcity of the coin, and throws predictability right out the window.

The economic policy of Bitcoin was set in stone at the time it was created. Block rewards bootstrap the security of network with subsidies for decades while transaction volume grows, eventually culminating in a network that is solely supported by transaction fees.

If Bitcoin Cash fails to gain transaction volume in the coming decades, then the blockchain will simply have weak security, or perhaps it can be buoyed by alternative solutions to the Byzantine general's problem... but, attempting to save the project by altering the economic policy is not an option.

2. Distribution of the Coinbase Rewards

The recent IFP proposal sought to divert a portion of the miner's rewards to developers. While this may seem, on the surface, to be a logical solution to the problem of funding development, the change is too radical, and the costs are too high.

The issues are myriad. Although it doesn't change the overall supply, it does introduce a new group of people (developers) who will receive coins via the protocol; thus the economic policy has changed.

One of the key aspects of Bitcoin is that no one should get free coins. In Bitcoin, coins only go to those who mine them by solving a block. This is part of 'fair distribution', and was a key reason why Bitcoin made sense to me when I heard about it in 2012.

If a crypto coin does have a mechanism to reward developers, then it should be in place at the coin's genesis. Forking in dev rewards (when there's already an economic policy in place) is a sure-fire recipe for contention and politics, and we saw this immediately in the IFP. Whenever possible, politics should be reduced and eliminated from the protocol. Adding politics is the wrong direction.

Thus, although dev rewards work for other coins, Bitcoin Cash cannot decide to become like Dash or Zcash and retain its identity as the legitimate continuation of the Bitcoin project.

3. Permissionless Transactions

Bitcoin has always been permissionless. You don't need permission to create an address, and you don't need permission to send or receive money. The establishment power structure loves control, and wants to be able to restrict how, when, and where people can spend their money.

Bitcoin was created to give people control of their own money, so we should never allow this aspect to change.

This is one of the great tragedies of the BTC roadmap: They seek to divert users from the permissionless blockchain to the permissioned Lightning Network. In addition, the Lightning Network has a centralizing effect based on liquidity, which negates the benefit of censorship resistance whereby any miner can place your transaction into a block.

4. Permissionless Mining

Just as we have permissionless transactions, in Bitcoin we also have permissionless mining. "nodes can leave and rejoin the network at will".

This also should never change. Be very wary of schemes that move us in this direction such as "miner id", even if they are advertised initially as "optional", because once in place, it is just one more step to make them mandatory.

5. The Peer-to-Peer Cash Use Case

Bitcoin was created with essentially a single purpose in mind: to be a peer-to-peer electronic cash system. It's literally in the title of the Bitcoin whitepaper.

Any change to Bitcoin should be looked at through this filter: Is the change positive, negative, or neutral in achieving the stated mission of the project?

This is not black and white. For example, OP_CHECKDATASIG was added relatively recently to the BCH protocol, and while it unlocks some valuable use-cases in the vein of "programmable money", it doesn't directly help improve the "peer to peer cash" aspect.

On the other hand, it doesn't detract from it either. So while there may be no hard and fast rule here, it can be a valuable guiding principle.

6. Scaling

As a peer-to-peer electronic cash system, we want Bitcoin Cash to be money for the world. This implies it must scale to meet global demand and eventually allow tens of billions of transactions per day.

The simplest guideline would be to only scale in a straightforward fashion: on-chain scaling with ever-increasing block sizes. However, it is too early to know if this is feasible at the highest levels, and it closes the door to additional scaling technologies that may be available in the future.

It is also not entirely straightforward what trade-offs may present themselves. As Bitcoin Core developer Gregory Maxwell noted, "There’s an inherent tradeoff between scale and decentralization when you talk about transactions on the network".

And although the one megabyte size was almost certainly incorrect by several orders of magnitude, there is no guarantee that unlimited-size blocks would be ideal either.

This means that while we might not be able to write an exact prescription for scaling to terabyte-sized blocks, we can aim to scale as far as we can using the blockchain system combined with software and hardware optimizations... and strive to avoid the mistakes that BTC made whereby scalability was subverted with unfounded concerns and diverted with unproven technologies.

7. Arithmetic Auditability

Sound money for the world must utilize a highly auditable blockchain. Privacy solutions with esoteric maths threaten this property and are not worth the trade-offs.

Advanced coinjoin schemes such as CashFusion, and future schemes such as Schnorr-based atomic swaps or second layer Zcoin accumulators, can provide ample privacy without sacrificing one of the most important properties of the blockchain, which is the ability for anyone to audit the supply.

Technical nerds may argue that other blockchains such as Monero are still auditable, but the skills to properly conduct such an audit become increasingly rare and esoteric. World money needs to be auditable by a great number of people, not just a few hundred experts around the world.

Bugs and attacks are possible in advanced schemes, and are increasingly likely as such systems evolve and are 'improved on'. By setting a low bar (arithmetic only), the system is de-risked and made to be rock solid.

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Written by   202
2 years ago
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Comments

Nice article

$ 0.00
1 year ago

A great article full of great ideas. Sadly, it seems like it was written to justify the pre-conclusion that setting up an automated way of funding developers from the money miners have already earned (their money), is one of the 7 deadly sins. This is the same slippery-slope argument created by the anti-BCH social engineers to try to stop us from funding our development. This false argument suggests we should not fund the developers because we would, then, be unable to resist the temptation to raise the 21 Million coin maximum. Real bad ideas are bad and that is why we should not do them. Funding our developers is good for BCH and would not lead to the inability to avoid doing terrible things.

Just because BCH is the coin that does upgrades to achieve the creation of peer-to-peer electronic cash for the world's people, does not mean we will lose control and do crazy stuff that is a bad idea for BCH. The IFP was stupidly invoked, but, it not actually bad for BCH except in that is is getting used by anti-BCH forces and their followers (many good folks) to split the community and create a new coin fork. Because of the politics, I do think the IFP should be removed by ABC. It is sad the politics will be hurting BCH no matter which way this goes now.

$ 0.10
2 years ago

For me, the IFP is in the same category as raising the 21M limit. They are both things the miners could theoretically enforce via Nakamoto consensus.

$ 0.00
2 years ago

Good writeup overall

I think your last point sounds like a CSW propaganda narrative. This statist BS needs to go.

We must demand the highest anonymity for BCH to be the best cash the world has seen. Monero has the right idea there.

$ 0.00
2 years ago

I used to think the same. Now, I think that privacy needs to be in second layers like wallets. The best money needs to have a trail when you want it to have one, and, no trail when you don't.

$ 0.00
2 years ago

The recent IFP proposal sought to divert a portion of the miner's rewards to developers. ... ... Although it doesn't change the overall supply, it does introduce a new group of people (developers) who will receive coins via the protocol; thus the economic policy has changed.

If the miners agree 100% to implement this, it is their rewards and they are allocating their money to support our developers. The economic policy of BCH remains unchanged. The same rewards go to the same miners. The only difference is it is set up to automatically forward part of their rewards to a different address than their own wallet address. I agree the current implementation does not require 100% BCH-miner-support. I would like to find a win-win solution that does.

$ 0.10
2 years ago