TL;DR: Bitcoin Unlimited (BU) Chief Scientist, Peter Rizun, added his objection recently, becoming the latest critic of the recently announced Infrastructure Funding Plan for Bitcoin Cash (IFP). “Despite the best of intentions,” Rizun explained, “the developer service fee, AKA dev tax, will corrupt BCH. It represents a departure too far both from our core principles and from bitcoin as peer-to-peer electronic cash.”
BU’s Chief Scientist Blasts BCH Dev Funding Proposal
Only days ago, influential mining pool operation BTC.TOP and its founder, Jiang Zhuoer, proposed a soft fork to orphan blocks of miners who chose to not accept a temporary, six month 12.5% redirection of the BCH coinbase block reward. The initiative’s other formal details were to be hammered out, according to Zhuoer during a subreddit AMA, which included a corporation established in Hong Kong for the projected $6,000,000 or so funds yet-to-be raised and distributed among BCH protocol and application development teams.
“Under the proposal,” Rizun reasoned, “it would be useful to think of new BCH coinbases as consisting of two parts: a coin that is competitively mined, and a token that is issued for zero cost to the Hong Kong corporation.” This is vital in conceptualizing, he believes, due to how with “nearly all of the discourse on [the IFP], it is claimed that miners pay.” Indeed, proponents are keen to point out all SHA-256 miners will be brought along, spreading out the cost ecosystem-wide. Rizun disagrees.
Instead, “the capital raised to pay developers actually originates from the investors who purchase the tokens issued to the Hong Kong company. The SHA256 miners as a group suffer only a small reduction in aggregate revenue,” creating what Rizun characterized as an “implicit investment contract between the Hong Kong corporation and the investors who purchase the tokens: the fee is passed on to the developers who would provide the service of advancing the protocol to generate profit for those investors.”
Peter Rizun is Chief Scientist of BCH node implementation Bitcoin Unlimited. Within the last year especially, tensions between BU and reference Bitcoin Cash implementation Bitcoin ABC have risen, culminating with ABC developers leaving BU as a form of protest. In chat rooms and message boards, Rizun and lead ABC developer Amaury Séchet exchanged often pointed and very technical arguments on a variety of issues related to Bitcoin Cash funding, transaction limits, and overall outlook as to how the project should proceed.
Such a Protocol Change Comes With a Great Cost
It’s also worth noting a major point of contention between the teams is BU’s holding over a supermajority of its cryptocurrency in BTC, not BCH. This fact alone, for some, has called into question BU’s commitment to Bitcoin Cash over other projects. Bitcoin Unlimited is also considered well-funded compared to ABC, even though ABC is the recognized reference implementation for Bitcoin Cash. When the differences have been highlighted, Rizun and BU often attribute them to the likes of investment prudence, while Séchet and ABC accuse BU of not having critical skin in the game when it comes to Bitcoin Cash’s future. Though not overtly stated, the IFP is thought by critics to be a direct answer to ABC’s lack of funding dilemma as the coin’s main infrastructure team. Séchet and ABC developers have come out in favor of the IFP.
“Although the service fee would create a reliable and stable mechanism to transfer money from investors to select developers,” Rizun conceded in his blasting of the IFP, “such a protocol change comes with great cost. Bitcoin Unlimited’s (BU’s) mandate is to foster the development and growth of ‘Bitcoin: a peer-to-peer electronic cash system’ as described in the white paper. It is my opinion that BU would not condone this radical departure that hard codes a third-party into the protocol.”
Preferring to further characterize proponents’ insistence of the IFP as being an example of cooperation, Rizun chose “collusion,” stressing “the scheme is indistinguishable from a scam that takes money from investors in exchange for tokens (issued to the HK corp at zero cost and legitimized by colluding exchanges) with the promise of moon [Lambos] in the future thanks to the hard work of its ‘world-class dev team,'” a jab at Zhuoer’s stated anticipation of a coming bull market.
Rizun further warned such an arrangement could run afoul of the Howey Test, long used by the US Securities and Exchange Commission especially for regulatory designation and jurisdiction. “The explicit purpose of the Hong Kong corporation is to pay developers whose efforts are intended to increase the value of the tokens,” Rizun assumed. “The Hong Kong company is in fact a promoter!” He then likened such a proposal for BCH dismissively as a form of “fiscal policy,” urging the community to “reject any change to the protocol” in this regard, calling the very attempt “sickening.”
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DISCLOSURE: The author holds cryptocurrency as part of his financial portfolio, including BCH.