Risk For Bitcoin Cash = Up

I’ve seen business models change from voluntary development donations to other funding sources in 2 coins before, NXT (launched ICO inflating supply) and BTC (raised Venture Capital reducing utility of main chain). In both cases the coin lost it’s most valuable investors and users: the idealists. In both cases the coin lost serious market share. Is Bitcoin Cash next?

I used to think having part of block reward / inflation go to development is good way to get sustainable funding that avoids the tragedy of the commons problem that voluntary donations business model has, where only a few donate and the rest free rides, hence why I liked Dash and Zcash.

But, piece of inflation paying for everything also causes voluntary donations in money, development and marketing, to collapse as now people expect to get payed. It also centralizes development and marketing as now everybody becomes dependent on this one funding stream. It also causes politics to emerge as now you have to sell yourself well in order to get funding from that stream. Typically such foundation with guaranteed income stream, ends up being overtaken by parasites who pay themselves well and care little for the mission as true entrepreneurs that care are not attracted to such employee positions.

Despite the loud complaining by Amaury Sechet about lack of funding for development, the amount of development done on BCH is actually very impressive. You currently have several independent clients/implementations, large and small ones competing. Last 6 months we got CashFusion, SLP tokens, and BCH has by far highest amount of idealist promoting and spending it. True, financial donations are not high compared to market cap but:

1. Most devs are very happy to develop for free for $BCH and do it mostly out of love, or to create value for their stash, or have other business depending on it. Same for most spokespeople and marketeers.
2. There was only 1 fundraiser to my knowledge where one could donate easily to different teams and it was actually quite successful raising an impressive 800 BCH or so in 2 months. However this success was not recognized as Amaury was causing trouble yet again complaining some parties should not have been on the list, KYC/AML regulations were not complied to (yet he did not follow up when I proposed to sign a paper as large donator), and didn’t even thank the community for the 400 BCH his team got, nor did his partner David Allan from the Development Foundation who received 200 BCH or so.

The biggest problem for me with this ‘proposal’ (that is actually a fait accompli decided by some miners without any debate with community beforehand) is that they plan to force all other miners, as well as all coinholders, to pay for something they deem good, via inflation. This goes against the very nature Bitcoin (Cash) was started for: fighting fiat inflation that always leads to a poor currency losing value over time instead of gaining.

Funding anything via inflation is a dangerous slippery slope that will likely lead to many other costs they deem necessary, by further reducing security (yes that is the trade off happening here by diverting piece existing inflation from mining/securing chain to development, a questionable trade off for a coin that is already at great risk to be 51% attacked) or when no more possible to reduce security, increasing inflation, creating a bigger and bigger group of parasites leeching from the system.

A much better solution I believe is launch not a temporary but permanent fundraise where builders (devs, marketeers, spokespeople) can make their case why they would like more donations, and donators can build a reputation based on their generosity. This embraces and cultivates the voluntary nature of the project and also has sound economic foundations: If your voluntary contribution is expected to benefit your bags more than the donation amount, you are incentivized. The presence of non-contributing parasites does not matter, ie: there is no tragedy of the commons problem, just donators who wished others would also give, but that does not mean one has to start forcing all.

One thing is sure, risk investing in BCH just went up considerably as this change in business model is likely to happen and is likely to drive away considerable part of the community, causing likely a drop in market ranking. If risk/reward ratio for BCH drops vs for example ETH and has now become lower overall, which is my opinion, it also justifies a lower exposure to it as well.

Post Author: CoinCryptoNews