This is a commentary on the Ethereum Classic (ETC) Call #16 a Preliminary proto-treasury meeting that I couldn’t attend to on May 12th of 2021. Below is a video of the call.
1. A Major Philosophical Point
It was interesting that in the call there was hardly any mention of the option of not implementing a treasury system in ETC at all. Implementing a treasury system is implementing governance, and a governance system financed by a tax on the network is a centralized organization.
There is no way around it. It is a synthetic corporation under the disguise of a blockchain.
This makes it not only not trust minimized, but prone to be considered subject for all sorts of legal liabilities, including considering the major voters and developers who decide and receive revenues from the treasury as trustees of the system.
Aside from the legal liabilities, the only way I could consider the treasury proposal even feasible is if it is limited in time. My proposal to limit any version of the treasury for 5 years stands. This can be implemented by just programming the tax to 0% in a certain block in the future. Very simple.
It is important for the ETC community to understand that if ETC is to be a $6 trillion dollar system in the future; used globally by governments, corporations, international entities, and individuals from all cultures, regions, and backgrounds; it is imperative that Ethereum Classic be as decentralized as Bitcoin.
Not even Ethereum, Ethereum 2.0, Cardano, Polkadot, Internet Computer, Zcash, Cosmos, or EOS may be analogies to ETC’s security.
The only security model possible is the maximum security possibly attainable by a blockchain. Nothing less.
The only honest way to regard the treasury in ETC is to understand that, while the blockchain has that device to prop it up while it gains market share and liquidity, it is a centralized system under the guise of a blockchain. A community fiat system like all the networks that use proof of stake, treasuries, and voting.
2. The Costly Infrastructure vs Limit in Time Debate
An objection that was raised to the limit in time to the treasury I mentioned in the previous point is that once the developer teams form their organizations and invest in infrastructure for the network, that infrastructure will have a significant cost to maintain on a continuous basis. This means that if the treasury suddenly stoped paying them, then they would be defunded, and such infrastructure abandoned.
To the above I have two responses:
1. If after 5 years of paying out hundreds of millions of dollars to developer teams and computer scientists, ETC is still not able to attract a market; with users, investors, private entities, and governments using it with an interest in maintaining it as is the case with Bitcoin; then Ethereum Classic failed. It was not the trust minimized blockchain that was envisioned by the founding fathers during the 2016 TheDAO crisis, and the Code Is Law philosophy was just a utopian belief.
2. If Ethereum Classic is in such need of funding as above after 5 years, and it is worthy of saving, then the community will get together again like now and make another hard fork to change the tax parameter and continue the treasury for another 5 years, if necessary.
Just as MESS and ETC Hash, the treasury is a temporary set of training wheels for ETC until it gains a critical mass of users, developers, and investors to sustain itself like other truly open source software based projects.
3. The Miner Tax vs Hashrate Debate
In this debate both sides are correct. They just seem to talk past each other.
It is obviously a reduction in miner revenues to impose a tax on the block rewards. That is an undeniable fact.
It is also a fact that if there are less miner revenues, then the hash rate is lower given a certain price of ETC.
However, the other side is also correct to point out that, although the miner tax, indeed, reduces miner revenues, the fact that the destination of the funds is for development and innovation actually may raise the price of the currency in a magnitude beyond the percentage of the tax.
In summary, if there is a block reward reduction, it is a physical reality that miners will receive less revenues in ETC, but if the final effects of the tax is to actually increase demand for the currency, beyond the 20% level, evidently miner revenue in fiat currencies will be higher after the tax.
The above is a sort of a hybrid between an accounting and an economic gimmick. I think it will be impossible to know in the future, when ETC will be worth $6 trillion, what caused the success of the network.
4. The Redistribution Problem
With ETC trading between $70 and $130, considering a midpoint of $100, I calculate that the developer teams who will receive the new revenues from the miner tax will get $134,642,995 per year while the reward is 3.2 ETC, and $107,714,396 when it goes to 2.56 ETC in the next fifthening.
I think this is an exorbitant amount of money, and will be much more when ETC takes off and trades past $1,000 as I expect.
The above will make the chosen 2, 3, or 4 developer teams to receive that cash flow extremely powerful to the point of being impossible for any community to vote or argue against them.
On top of that, to demand a quorum of 1/3 of all the coins issued just to fire them is a major barrier that I think must be removed.
My proposal to mitigate this problem is to reduce the miner tax to 5%.
This 5% level would be $33,660,749 and $26,928,599 per year with the block rewards levels mentioned above.
This money would more than finance great developers and computer scientists working on ETC, and will greatly enhance the value of the chain, increasing its value well beyond the 5% tax, but at the same time not creating monster developer teams who will inexorably abuse the network and ecosystem.
Summary
The Ethereum Classic community must understand what is real trust minimization, and a treasury system, no matter the quirks and gimmicks it may contain, will not be trust minimized and would centralize the chain while it exists.
Governments, corporations, international entities, and individuals from all cultures, regions, and backgrounds in the world will not use a blockchain that is controlled by some developers in The West who can confiscate, tamper with, or be easily coerced legally to arbitrarily modify the state or the monetary policy of ETC.
The only viable option is to limit the treasury in time, with the understanding that, while it exists, Ethereum Classic will not be fully and truly decentralized.
The miner tax does, indeed, reduce hashrate at any given price of ETC, but those prices may probably be higher, beyond the percentage of the miner tax, with a treasury than without at this stage of the life of ETC.
It is important to control the cash flow to developer teams, and a miner tax of 5% would be a much better level, providing ample revenues for developer teams and computer scientists to build and innovate on ETC.
Code Is Law
