“The brightest crowns that are worn in heaven have been tried, and smelted, and polished and glorified through the furnaces of tribulation.” – Edwin Hubbel Chapin
If you’re reading this, you’ve probably heard it all before. Bank the unbanked! More economic freedom for the world! The hardest money ever invented!
And while most Bitcoiners agree with the sentiment behind these slogans, they don’t seem to realize that banking the unbanked, increasing economic freedom, or turning Bitcoin into money that can actually be used around the world isn’t going to just magically happen on its own.
Compare the advancements made in the Bitcoin ecosystem to that of the iPhone ecosystem over the past ten years. It’s not even close. Yes the price of Bitcoin has risen astronomically in that time, and you can argue that this increase in price makes Bitcoin more useful, but I’d argue that in every other way Bitcoin has failed miserably by comparison. Today there are over 100 million iPhone users in the US. How many actual users does Bitcoin have?
The reason almost no one uses Bitcoin for anything but to buy low and sell high is because the infrastructure simply isn’t there. The infrastructure necessary to make it easy to use and build on in order to profit in ways other than pure speculation.
We have yet to scale the Bitcoin network for it to be a viable alternative to the traditional financial system. We need better wallets, better custody solutions, better point of sale systems. In order to make Bitcoin ubiquitous, we need to keep iterating and building until it’s easy enough for grandma and grandpa to use, until it’s safe and reliable enough for institutions to use, and cheap enough to be used by the poorest amongst us.
I want to see a world where using Bitcoin is as common as using an iPhone. Where I can walk into any store and assume they accept it as payment. I believe that the technology introduced by Satoshi Nakamoto can one day give us a world where a greater portion of profits go to those who truly build and contribute value rather than mere rent seekers. A world where my identity isn’t tied to my Apple ID, or my Gmail or Facebook account, but one where I can simply use my public/private keys to keep my privacy intact.
The thing is, Bitcoin is capable of doing so much more than it can today. Shammah Chancellor, a former Bitcoin ABC developer, recently released his Stamp project on the BCHA mainnet giving us a glimpse into how encrypted, decentralized messaging could work using Bitcoin. His CashWeb protocol hints at a world where we no longer have to rely on huge tech corporations to manage our data or reputations anymore, where we are able to cut through the noise by ascribing small amounts of value to every interaction.
So if all this is possible using Bitcoin, how come we’ve made so little progress? And how do we fix that moving forward?
The answers to such questions are complicated, but I believe it ultimately boils down to resources, or a lack thereof. While miners, exchanges, and early adopters have greatly profited off of Bitcoin due to the increase in price, such an opportunity doesn’t exist for developers who are only now being introduced to Bitcoin. As such the project lacks an efficient mechanism to attract new and talented developers to the project, which will definitely be needed to help solve some of its biggest challenges.
In the beginning, all Bitcoin development was done on a voluntary basis. But as the network grew, it required more maintenance, meaning more engineers, and that’s before accounting for the work needed to move the protocol forward. Eventually we began to see prominent developers start to become sponsored by individuals or companies who sought to have dedicated professionals working on Bitcoin full time.
But unfortunately for those who seek to make Bitcoin able to be used as money, the donation model appears to have failed. While the Bitcoin mining industry has grown by leaps and bounds in the last decade, we have not seen the same type of growth when it comes to Bitcoin node development.
Currently, the vast majority of Bitcoin development is managed by Bitcoin Core, and since Core’s major sponsors believe Bitcoin is better served by focusing on being a digital store of value while sacrificing its usage as a medium of exchange, there has been little appetite by the Core developers to work on scaling the base layer to allow for fast, cheap, and reliable transactions. They favored keeping Bitcoin slow and expensive in order to encourage using second layer solutions their sponsors hope to profit from in the future.
Fortunately, one of the most beautiful things about Bitcoin, and perhaps one of its greatest strengths, is the ability for anyone to fork the code and create their own network based on their preferred consensus rules. This is what happened on August 1, 2017 when Bitcoin ABC worked with other members of the ecosystem to create Bitcoin Cash (BCH).
The goal of BCH was to preserve the original Bitcoin mission of becoming electronic cash for the world. The BCH network immediately raised the block-size from 1 MB to 8MB (then to 32 MB) to increase the throughput capacity. New op_codes were added as well as other improvements to make BCH more useful in daily commerce. But the fact is these changes were merely supposed to be the beginning. In order to scale Bitcoin to serve all of humanity, a lot more work was left to be done, but the BCH project ultimately faced the same lack of resources that hampered BTC.
Relying on donations proved once again to be insufficient as there wasn’t enough money to ramp up development. Some blame it on the extended bear market that started not long after the creation of BCH, or they blame it on the inability of Bitcoin ABC to attract the necessary funding, but I believe the lack of funding wasn’t attributable to either. The truth is that even with its meteoric rise, BTC developer funding faces the same challenges. I think the real issue is solely attributable to the freerider problem. After all, why would someone pay for infrastructure if someone else is potentially going to foot the bill. For example if you were told that paying for garbage pick-up services was optional, how much would you pay, if anything?
The New Coinbase Rule and the Global Network Council
Enter the New Coinbase Rule (NCR) that was implemented by Bitcoin ABC this past November and the reason BCHA split off from BCH. The NCR requires miners to divert 8% of their mining rewards in each block to an address controlled by Bitcoin ABC. Half of the ~26,000 BCHA deposited to this address annually will be used directly by ABC to fund protocol development, while the other half will be used to fund BCHA infrastructure. How that half of the money is to be spent will be decided upon by the Global Network Council (GNC) comprised of the biggest BCHA miners and holders who will come together once a year to make those decisions.
I believe these two features in combination can finally solve the problems that have plagued Bitcoin since its inception. The NCR will align the incentives of both miners and developers to ultimately increase the long term value of BCHA by making it more useful and desirable, not with flashy marketing campaigns or short-lived price pumps as a result of misleading announcements.
And just because the developers will now be paid out of the coinbase reward doesn’t mean that voluntarism is dead in BCHA. There are still plenty of people working to promote and increase adoption of BCHA simply because they are passionate about this project and share the same goals as Bitcoin ABC. I am proud to include myself in that group.
On the other hand, what the new coinbase rule does mean is that we no longer have to rely solely on the goodwill of others to survive. The network will no longer be susceptible to the whims of a donor with deep pockets who may or may not have the best interest of the network in mind. It also means that those who prove their work and build something that adds real value to the BCHA ecosystem now have a clear pathway to get funded as the members of the GNC seek to reward projects that increase the value of their holdings.
What’s unique about the NCR is that it opens up new avenues of creating wealth. While the GNC will also have the opportunity to invest in profit-seeking businesses that add value to BCHA, it can also choose to invest in projects that are seen as public goods that might have otherwise fallen by the wayside.
Some are concerned that the NCR gives too much power to a single developer team. But I believe this fear to be unfounded. Not because I think Bitcoin ABC is infallible, but because I think there are enough checks and balances in place to prevent any one group of having too much control. In fact we saw this play out this past November as the vast majority of the BCH ecosystem chose not to follow Bitcoin ABC’s lead.
To me that was a mistake. The activation of the NCR means that miners and holders now have an opportunity to fire a dev team, which wasn’t possible before as it’s impossible to fire someone if you’re not paying to employ them. The NCR also means that anyone who demonstrates they can add more value to the BCHA network than the current lead implementation can compete for those funds. Therefore, for the first time in Bitcoin’s history, the NCR adds a new aspect to the competitive landscape of Bitcoin development that previously didn’t exist.
As important as the NCR is, I also think the GNC introduces a different type of opportunity. Once again, for the first time in Bitcoin’s history, we will have a formalized process to make impactful decisions on the direction of the project. A process that ensures only those with actual skin in the game can participate. A process that makes it easier to filter out the noise of social media and focus on the people who matter, whose wealth is directly tied to the value of BCHA and thus would find it more profitable to play by the rules rather than undermine the system.
The GNC gives us a chance to try a new form of governance where it is no longer about majority rules but stakeholder rules.
ABC has set out to lead by laying out their goals and how they aim to achieve them. Everyone is invited to follow them on this journey, but the choice is up to you whether or not you want to accept the invitation.
Today BCHA is small. It is the minority fork, of a majority fork, of a minority fork. But where others may have chosen to give up under such circumstances, Bitcoin ABC and their supporters continue to believe in this project. To me it’s a testament to both the level of importance we place on the mission we’re trying to achieve, as well as our conviction that BCHA represents the best path to ultimately realize our goal of creating the best money the world has ever seen.