@maff1989
edited
DEBUNKED: "The IFP destroys BCH soundness"
In recent weeks, I have noticed conversation floating around r/btc that claims the IFP destroys BCH soundness. The arguments that I've read in support of this claim are extremely weak, and I will be addressing them in this article. First, let me define "currency" as a tool used by humans to facilitate trade. "Currency" possesses the following attributes: Divisible Durable (EDIT) Portable Fungible Unit of account Medium of exchange Now, "sound money" is defined as "***currency that is also a store of value***". But what makes a currency a "store of value"? Well, simply put, there are many factors, however the important thing is that the currency *retains its value over an extended period of time*. Historically, fiat currencies have not been considered "sound money", as they have all ultimately **inflated** into worthlessness. Governments and central banks, in their vein attempts to save their failing economies, print their currency into oblivion and, through this **inflation**, dramatically reduce the purchasing power of each note of currency, until citizens are hiking wheelbarrows full of the stuff down to the market. (e.g. the infamous hyperinflation of the Weimar Republic). https://en.wikipedia.org/wiki/Weimar_Republic#Hyperinflation Bitcoin, as a currency, was built with inherent ***deflation***, whereby the supply of circulating bitcoins ***decreases*** over time. Therefore, *hyperinflation is impossible with Bitcoin*, thus why it is so attractive to many that hold it. But where does the IFP come into this equation? Essentially, **IT DOESN'T**. The IFP does nothing to alter BCH's inflation rate, schedule, etc., therefore it does not affect BCH "soundness". Claiming otherwise is a **faulty deduction** based on a **misunderstanding** of history, "sound money", and the Bitcoin system. Response to u/ErdoganTalk From this post: https://read.cash/@ErdoganTalk/the-soundness-the-essential-feature-of-the-money-that-we-want-e769f107 There is no need for a central bank for gold, and this lack of a need for an authority is what makes the gold sound. This is entirely untrue. Gold was cumbersome and not ideal for a growing trade market. Therefore, early banks were constructed and became vaults for consumer gold. The bankers issued **certificates** for consumers to redeem gold deposits. *Banks were the authority* . It wasn't until banks issued certificates that could redeem more gold than they had stored, that the soundness of gold-backed money was destroyed. ***It was fractional-reserve banking that made gold-backed currency unsound****.* The soundness [of Bitcoin Cash] is that nobody gets coins for free, and the resulting lack of need of an authority. A couple things are wrong with this statement. First, in Bitcoin, miners offer Proof-of-Work to claim the block reward. Under the IFP, the miners provide developers *a portion of this earned block reward* **with the expectation that future code will be written** by those developers (i.e. not for free) to bolster the miners' infrastructure. Second, **BITCOIN IS OPERATED BY A DECENTRALIZED AUTHORITATIVE BODY** (miners). If it is solely the existence of an authority that destroys the soundness of money, then the world has never experienced sound money, **and Bitcoin can never become sound money**. Response to u/gr8ful4 Most of this post appears to be a conglomeration of random blobs of largely irrelevant Satoshi quotes, and the rest boils down to a massive misunderstanding of "sound money". https://read.cash/@gr8ful4/what-makes-satoshis-electronic-p2p-cash-system-actual-soundmoney-and-why-it-matters-to-you-f79f6207 https://read.cash/@gr8ful4/what-makes-satoshis-electronic-p2p-cash-system-actual-soundmoney-and-why-it-matters-to-you-f79f6207#how-i-understand-sound-cryptomoney-tbd However, after sifting through the wall of text, his main point appears to be: It is the constant abuse of power of a smart (or deceitful) minority in human history that gained tremendously at the expense of the majority by making money unsound. Here, he is conflating the introduction of the IFP (and subsequent code commit by Bitcoin ABC) with "a minority gaining tremendously at the expense of the majority". However, as explained above, this isn't the case, because the IFP doesn't touch Bitcoin's inflation. https://github.com/Bitcoin-ABC/bitcoin-abc/commit/b46180893ed61fdc13fa5f95a5a7292c003e1a57 Conclusion As outlined above, "sound money" is "currency that is a store of value". Historically, fiat currencies have hyperinflated, destroying their currency's purchasing power, and ultimately their soundness. The statement that "the IFP destroys BCH soundness" is **WRONG**, and is based on a misunderstanding of history, "sound money", and Bitcoin itself. Thanks for reading!
4 comments
Smart people seem to have been fooled by sophisticated social engineering efforts into believing the IFP destroys BCH's soundness and the team behind this (attempt by miners to set up automated fair donation system intended to support BCH development) has corrupt intent.
'smart' people
Like your other article about adoption of BCH failing and what to focus on, but this article is a total plain crash. Soundness of money is indeed the central critique to the IFP/devtax. Gold was sound as nobody could print more of it, but indeed had drawback of being too heavy. Paper currencies and bank promises solved this but had drawback of being inflated or default. Crypto is revolutionary in that it can offer the soundness of gold, while also being light and digitally transferable. IFP reduces, the already low, security by diverting piece of inflation away that funds it. Diverting this piece to select few dev's increases centralization of development as it discourages all other devs/clients working for free to increase value of their stash, that will quit. Voluntary donations for infrastructure work, as proven by Linux, Bitcoin in early days, Ethereum, and Bitcoin Cash since inception. Yes, it's not easy to get donations, but they do come when you prove to create value and are grateful when you receive them. The problem with fiat money is not that there is more money being created, like with companies one can inflate stock supply as long as more value is received in return for that new supply, the company and it's stock will go up from the deal. It's when the newly issued coins/shares are given to someone that does not offer enough value in return that will cause the transaction to be negative and lower the value of all shares or coins in circulation. This is exactly what would have happened with the IFP/devtax. Even when overall inflation is not increased, the loss in security, the loss in dev activity from decentralised motivated devs, the loss in moral high ground and loss in idealists, spokespeople, holders and promotors, all would cause the overall adoption and value of BitcoinCash to go down. Here my article with more detail why I think IFP/devtax is horrible idea: https://read.cash/@MarcDeMesel/risk-for-bitcoin-cash-up-f639ab51
> devtax If you want any further serious debate me following this reply, you'll not use this strawman. :) > IFP reduces, the already low, security by diverting piece of inflation away that funds it. Diverting this piece to select few dev's increases centralization of development as it discourages all other devs/clients working for free to increase value of their stash, that will quit. Yes, there is a loss in security, but this loss can be easily offset with an increasing price of BCH, or with users dedicating their own funds by increasing the tx fees they pay. In my opinion, "centralization of development" doesn't matter **AS LONG AS** the developers are working in the best interest of the rest of the ecosystem. If miners are the ones funding the developers, then how could the output produced by the developers **NOT** be in the best interest of the ecosystem? It would seem to me that developer incentive exists to write code for the benefit of the ecosystem, since it is miners funding it; and miners want the ecosystem to grow, because a growing ecosystem means more profits. Also, at the time the IFP was introduced, >95% of BCH blocks were mined with ABC. So considering the situation at the time the IFP was introduced, why would miners propose to fund any nodes besides ABC anyway? Regardless of whatever other nodes work, miners don't use them, and non-mining nodes are read-only blockchain servers that produce no value for the chain (notice I use the word "chain" specifically). BCHD was only added to the IFP on the 3rd proposal, and they were only added because community sentiment wanted more than just a "Hong Kong Corporation" to receive the funds, so a whitelist was generated to which devs and miners agreed, but the community ultimately did not. > The problem with fiat money is not that there is more money being created, like with companies one can inflate stock supply as long as more value is received in return for that new supply, the company and it's stock will go up from the deal. It's when the newly issued coins/shares are given to someone that does not offer enough value in return that will cause the transaction to be negative and lower all stock or coins in circulation. Currency issuance in the Bitcoin system is not anything like companies inflating share supply. Miners cannot inflate the **KNOWN** and **EXPECTED** BCH coin supply of 21 million unless the rest of the ecosystem agrees to the change. Otherwise, if they make a decision nobody else likes, everybody else can move to another coin, value would plummet, miners would **LOSE**. Miners know this. With a publicly-traded company, shareholders, executives, board members, etc. can increase their number of shares without the employees knowing anything, and those unsuspecting employees are the ones that usually get fucked at the end of that deal. Couldn't happen that way in Bitcoin. > This is exactly what would have happened with the IFP/devtax. Even when overall inflation is not increased, the loss in security, the loss in dev activity from decentralised motivated devs, the loss in moral high ground and loss in idealists, spokespeople, holders and promotors, all would cause the overall adoption and value of BitcoinCash to go down. I don't think you've clearly demonstrated that the IFP is the cause of any of that. The security issue you referenced is really a nothingburger, and "decentralized motivated devs" should be motivated enough to find funding, whether through a different group of miners, a sponsorship, or whatever. But we know where the kind of Blockstream-style sponsorships come from, and we know that they **DON'T** come from miners... I have no idea what you mean by "moral high ground". You don't build value in cryptocurrency with moral high ground. You build value with applications that work and that people want to use. BCH loses value because doesn't spend enough energy building value. Overall, I remain unconvinced by your arguments. I think the IFP would be a tremendous boost in market confidence for BCH, because then it would mean at least 6-months of guaranteed cash flow going to developers that are writing code that miners use to run the network. I just think that sounds good from a bagholder perspective, like mine. I think the IFP would help BCH build value, not reduce it.