This is a sub-article of a larger article that goes in depth of what we've learned from the past week's of conversations and debates around BTC.TOP CEO's Jiang Zhuoer proposed solution to the long existing development funding debate. The parent article may be found here.
After Jiang Zhuoer proposed a solution to the long existing development funding debate, there has been some very intelligent discussion on both sides. My original response to the proposal invoked some very complicated emotions. With that realization, I took about a week to hear people's perspectives and spoke with the people I respect most in this community one-on-one. I took the weekend to reflect and then discussed with the Verde team.
We wanted to compile our understanding and conclusions.
The idea as a whole
The intent is amicable. I don't believe any organization, including BTC.TOP and Bitcoin.com, had a malicious or manipulative intents when they proposed their idea. I think any claim to the contrary would require extraordinary evidence, and I think their goals are well defined and well-aligned with their business models, and I think the community agrees for the most part that this is their take at a solution to what is undoubtably a very complicated problem.
Furthermore, Jiang Zhuoer made it very clear that the original post is an open proposal and that the details are still up for discussion. I have been in planning meetings that become so long and stale that you want to just admit the situation is complicated and we will never know for certain what the best choice is--so let's just pick something and find out.
This situation is a reflection of a complicated world, and a global currency also means a global culture, and if that's not a complicated situation then I don't know what is.
Despite some conflicts of interest with well-meaning intentions, we are reasonably sure that the proposal isn't an elaborate hostile takeover. At its root, it is proposing something that we all agree on: we want to find a way to fund and facilitate development. Proposing a solution with that goal in mind is not heresy and ideas are not bad; let's not condemn people for trying to be helpful.
In line with that, Amaury's expansion on the idea is also not a malicious idea. He wants what is best for his group and he's not wrong: the people he's listed have a proven track record for the support of BCH; they're invested and I don't think they'd make bad choices rooted with malice. While this does not mean I support his idea, it also doesn't mean I don't support these people. In fact, many of these people have become my friends.
I have roughly 9 years of experience running a software business, and I am well aware that talented people do not work for free for very long (it's not even a matter of whether or not they want to--they literally reasonably cannot; our world simply does not work that way). So I empathize with Amaury's plight, and I want his problem solved. But not like this.
Bitcoin Verde's understanding of the hot topics
There are a few highly contentious topics within Jiang's proposal.
Relying on a centralized distributor of the funds.
Despite its contrast to the rest of Bitcoin's ethos, there are some genuine benefits to this methodology, and if Jiang is trying to keep things simple, then this is certainly a reasonable proposal despite its flaws.
a. For one, it inspires a checks/balance mechanism on development (if not controlled by the developers themselves). As Roger Ver pointed out, developers can be more efficient when there's a budget constraining them to make tough choices--within reason, of course. Without stake holders communicating demands, we can easily end up with a situation that spawned BTC's Lightning--which was certainly an interesting computer science effort, but there is more to a project's success than just solving a cool technical problem. In software development, user experience is often king.
b. Additionally, a central fund allows for future projects to apply for funding and in theory allows all projects the opportunity to make solid value proposals for funding. If this is purely a Bitcoin ABC funding plan then perhaps this benefit wouldn't be realized, but an organization to lobby allows the community to put pressure on the direction of funds. This isn't necessarily a bad thing if they're receptive and it works. It's how democracy and protesting is supposed to work... but we also know that doesn't always work either.
c. Finally, and allegedly, some organizations cannot receive anonymous donations. Which organizations and for what reasons I have not been made aware, but I choose to give them the benefit of the doubt that this can be a real constraint. A central organization is certainly not anonymous, so perhaps this alleviates this problem.
However, there are also some heavy drawbacks for a central distributor.
a. A central organization has a very difficult path ahead of them: no matter what they do they will be seen as acting unfairly. For instance, do they donate 100% to ABC, do they split it evenly, do they partition it, and if so, how do they partition it? The answers to all of these questions are lose-lose from an optics perspective; no matter what decision they come to, it will be seen as a misrepresentation of funds. Even if the organization was working diligently and honestly, they simply cannot know with any real confidence or insight what the entire community wants nor could they accurately explain their conclusions because it's a very complicated decision and often comes down to a judgment call. Any central organization will always be viewed as malicious actors and viewed with contempt, fairly or not. This disdain will sew dissent and distrust, and our community is divided enough already.
b. A central organization has no incentive to remain objective. There will always be a conflict of interest. And the reality is any organization will have no oversight or tangible consequence for acting impartially. Ultimately, there is an inherent conflict of interest. An absolute power over development funds will corrupt absolutely. We keep lamenting the creation of Blockstream 2.0, and here we are on the precipice of electing a new one.
Funding developers directly through a funding initiative.
Leaving the sponsorship up to the individual miners/pools is democratic in nature and can be objectively more fair. With this methodology miners are able to represent their own interests proportionally instead of blindly relying on the judgement of central (and non-elected) organization.
However, directly funding developers has been done before, and lessons have been taken from those previous efforts. These lessons include the realization that funding developers for the sake of funding them does not inspire action within would-be donators--the demand is too abstract. More importantly, undirected donations does it command efficiency or accountability.
There are also logistical problems with direct funding, which includes the possibility of pools to game the system enabling them to indirectly fund themselves.
This requires the list be vetted. But by whom? And how large should the list be? And where do projects go to plead their case for funding? This schema, without major innovation, leaves us in a similar predicament as we are currently.
Who is really paying for the fund?
There is a difference between mining pools and miners. The current proposal may represent mining pools interests, but miners' must also vote with their hashing power by selecting which pool they mine for. In some ways, this is similar to a representative democracy. This initiative may be representative of the pool's desires, but may not be representative of the miners themselves.
That being said, Mark Lundeberg convinced me that the long term cost of the proposal to the miners is substantially lower than 12.5%. The reason for this is that as profitability decreases, hashing power is balanced away from BCH. With less competition, the Bitcoin Cash miners will be finding more blocks than before (proportionally), which increases their revenue (sans the 12.5%, of course). Ultimately, after some oscillation, profitability balances out to similar levels. At least theoretically. This component is what makes the plan rather clever, but is still theoretical.
Protocol change or Nakamoto Consensus?
Of the concerns listed, the most important to our team is the precedent set by this proposal.
Having nodes condone/facilitate this behavior sets a precedent that cannot be undone. When nodes coordinate with pools to shift power away from other miners, we risk setting a dangerous precedent of power.
However, if the power is only held by the miners/pools (and the node implementations are uninvolved) the miners may choose to embark on an expensive hash war by enforcing this rule themselves. That is their right.
This isolationism-like decision also allows for any pool to vote against the funding initiative at any time.
When this decision is applied via a protocol change, pools are effectively locked in for the entire duration. If attempting to leave, miners have plenty incentive to lie about their intentions with their competitors. Furthermore, there will be unsurmountable logistical problems regarding an unplanned network upgrade.
It is easier to understand if you look at the total SHA256 mining industry. Reducing BCH mining rewards with 12.5% will reduce the size of this industry, but because BCH mining is only a small part of the industry, the effect on the total industry is much smaller than 12.5%.