💰 Future Funding — Issue No. 58

📰News

The Zcash community is debating whether to extend its protocol level developer funding mechanism. Currently, 20% of the coins mined in each block go to the Electric Coin Company (ECC), which launched the cutting edge privacy-centric cryptocurrency three years ago, and has been shepherding its development and adoption since. This reward is scheduled to expire in October 2020, and can only be extended via new consensus code included in a future network upgrade. This week, ECC founder and CEO, Zooko Wilcox, penned an earnest letter to the community laying out his perspective. For one, Zooko sees the debate happening within the community as healthy and expected. In fact, he states the original reward period was only four years so as to trigger such a discussion. For its part, the ECC is willing to "take the job" should the community choose to extend the dev reward and hire them for it, but is also committed to implementing, auditing, and deploying whatever change the community converges on. Link.

Of course, one of the challenges will be that "the community" doesn't have a singular will. No proposal is going to make everyone happy, and the network will be at a high risk for a contentious fork. Earlier this year there was a "friendly fork" of the Zcash network called Ycash. The community members who are leading that project cited a desire to extend the developer reward as one of the reasons for it. While Ycash may have been friendly, any chainsplit arising from this debate is unlikely to be. Link.

As a high-profile cyrptocurrency with a protocol level mechanism for funding development, Zcash is a relative rarity. Most projects rely on some combination of motivated enthusiasts, the generosity of stakeholders, and corporate/venture backing. The Ethereum network, for example, has all three of these in spades. Yet many believe the development of Ethereum 2.0, and the maintenance of the 1.0 chain, are still underfunded. Recently, some members of that community proposed a change for the upcoming Istanbul upgrade that would have included a time bounded block reward to fund Ethereum 1.0's maintenance. The reaction to this proposal, though, was swift and harsh. The community feedback was so negative, the people behind the proposal decided to withdraw it from consideration. Ethereum's development may or may not be underfunded, but a protocol level solution to that problem seems to be off the table. Link.

This may come as a shock to some of you, but I was something of a nerd in high school. I know, it's surprising. Cloud hosting didn't exist then, but I wanted to put things on the web, so I built a webserver, installed Linux and Apache, and used it to host janky websites I cobbled together with MySQL and PHP. Good times!

This was my first experience with open source software, and I became an enthusiast. I believed the in the manifest destiny of OSS. The superior quality of code written in the open, coupled with the fact it was free to use and customize, would undoubtedly lead to the downfall of corporate, closed sourced software. As I grew up, literally, alongside the nascent OSS movement, I learned the world doesn't always work the way idealistic teenagers would like.

The history of open source software in the intervening two decades is outside of the scope of this newsletter, but here is where we ended up. Consumer OSS went nowhere. Virtually none of the applications used by normal users day to day are built in the open. At the infrastructure level, though, open source has come to dominate. Server software, programming languages, web renders— all are open source. But each discrete project is funded and governed by a single large corporate sponsor, or in some cases, by a small consortium of companies.

It turns out, incentives matter. Sustainability matters. Without viable, long term funding sources, most projects died. The ones that survived did so because they had large corporate sponsors who had an interest in guiding the direction of a piece of computing infrastructure. Open source today is great in many ways, but it also didn't turn out the way many of us hoped.

I have scar tissue from living through that progression. It informs my opinion on the issue of protocol level funding for decentralized cryptonetworks. The best argument against such funding is that it creates a political attack vector for self interested actors to manipulate the community and extract wealth for themselves. The flipside, though, is that a lack of funding also opens the door for self interested actors to exert their will. Given that we're literally making money, I wish more projects had been more open to establishing sustainable funding mechanisms in the protocol.

It's definitely too late for Bitcoin to adopt a protocol level developer funding mechanism, and that ship has seemingly sailed for Ethereum as well. C'est la vie. It very well might be for the best— perhaps I'm over indexing on my experience in the open source world and underestimating the political risk. But given that the Zcash community already has a cultural norm established around protocol level developer funding, I sincerely hope they decide to extend it. A privacy enabling, censorship resistant cryptocurrency may end up being one of the most important pieces of infrastructure for a more decentralized world. Building one requires expertise and effort. Without protocol level funding, the network is likely to languish or be co-opted. That would be a shame.
 

📊Statistics

39%. The proportion of transactions on the Bitcoin network utilizing Segregated Witness for signatures. SegWit was the last major upgrade to Bitcoin, and it rolled out two years ago. Its usage on the network has remained at this level since last fall. While interesting, this isn't necessarily a bad thing. SegWit is useful for certain types of users, but not really needed for others. Link.
 

🎧Podcast

I had the pleasure of joining Anthony Pompliano as a guest on his Off The Chain podcast. We discussed the crypto world from my perspective as a developer, especially focusing on how smart contracts allow us to build new kinds of software systems. Give it a listen! Link.