💶 Broke Moneymakers — Issue No. 36

📰 News

Last week Michael Cordner, one of the lead developers behind the Grin cyrptocurrency, initiated a fundraising campaign to pay for his work. The campaign aims to raise €55,000 (~63,000 USD), enough for him to work full time on the project for six months. Grin, you might remember, is the recently launched community lead implementation of the MimbleWimble protocol. It aims to improve on the privacy and scalability of cyrptocurrency networks. All development of Grin to date has been done by volunteers, or by those funded by community members in this manner. The project endeavored to have a so-called "fair launch". As such, it refrained from any protocol-level funding mechanisms, such as a pre-mine, token sale, or founders reward included in each block. Link.

A few days after being announced, the campaign for Cordner's salary had raised less than 10% of it's goal. This prompted another lead developer of Grin to write a compelling post lamenting the difficulty of funding development, even in an ecosystem where miners and speculators were spending many millions of dollars. These investors are hoping to capitalize on Grin's success, yet are unwilling to help finance it. In the post, he wrote: "The lesson... looks pretty clear: more scammy ICOs for a lot more money and a lot less work. Perhaps forcefully taking 20% of all [mining] rewards is the only way to get any contribution". A day after this post was widely circulated on social media, the campaign met its goal. Link.

Funding for cryptocurrency protocol development is a classic "Tragedy of the Commons" style problem. While all stakeholders in the network would benefit from development being well funded, no single actor can do it by themselves, and no clear mechanism exists to coordinate their cooperation and prevent free-riding. The truth is, every blockchain network today is dealing with this problem in one form or another, including very large, successful projects. It has recently become clear, for example, that development of the Ethereum 2.0 chain is grossly under-provisioned. One interesting attempt to deal with this is the MolochDAO-- a decentralized autonomous organization being developed on Ethereum itself. While I'm skeptical it can "solve" the problem, I applaud the dogfooding and the creativity; every little bit helps. Link.

The problem of developer incentives and funding is one of my "pet issues" in the blockchain world. I'm a developer myself, and I "came of age" alongside the open source software movement. I've literally been using, following, and contributing to open source software since my childhood. In a sense, then, I've seen this movie before, and it's frustrating to see the crypto community falling into the same traps the open source community did decades ago.

The early days of the open source world were marked with noble visions of a software ecosystem free from the grips of corporate interests, one that would empower its users. This vision led to an idealistic purity, and a norm emerged in the community that profit motives around open source were inherently suspect. This proved quite naive in retrospect, and is at least partially why open source has succeeded as infrastructure, but never as mainstream user facing software. The open source world continues to struggle with funding, and most large projects are shepherded by a single parent company. In many ways, then, it is more at the whim of corporate interests today because the early community discounted the importance of incentives.

The idea of a "fair launch", which the Grin community strove for, echoes this same naivety. In reality, distribution of Grin coins is still not "fair", it's just going to those who have the most capital to spend on mining equipment and electricity. Should Grin appreciate, it will be these well capitalized, deep-pocketed investors who profit the most. Meanwhile, the developers behind the protocol itself have to beg and bluster to fund a mere six months of a senior engineer's fair market salary.

What's doubly frustrating in the case of cryptonetworks is that, unlike normal open source software, these projects have native mechanisms available to them to fund development and align incentives. Why should a 20% founder's reward-- mined in each block and decaying over time-- be looked at negatively, for example? There are some tradeoffs, sure, but is it worse than not being able to fund developers at all?

At the end of the day, resources for developers have to come from somewhere. When the protocols being created are literally making money, it seems reasonable that some of it would be allocated for their maintenance. If some is not, then the projects will suffer as a result, or they'll simply be co-opted by whoever stands to gain the most by trading funds for influence.

📊 Statistics

434,000. The number of Ether reported lost by a Canadian exchange after their founder, who supposedly had sole possession of the cold storage keys, passed away. This accounts for 0.5% of Ether's circulating supply. In total, $190 Million worth of various coins were lost. Link.