How stakeholders will shape the future development of Bitcoin Cash infrastructure.
Last week, we announced that major stakeholders can join the Global Network Council to decide which infrastructure projects will be financed through the new coinbase rule.
Today, we’re excited to share the framework for that new governance model. There’s a lot of information so we’ve added plenty of headers to make reading easier!
Purpose and principles
What is it?
The Global Network Council is a new system of governance that invites key stakeholders to decide which Bitcoin Cash infrastructure projects should be funded. It revolves around the fund raised from each block reward through the new coinbase rule.
As members of the Global Network Council, major miners and holders will gather together once a year to vote on how a portion of the fund is reinvested back into the Bitcoin Cash ecosystem. In doing so, they will shape the future development of Bitcoin Cash infrastructure.
The structure outlined here is meant to serve as a starting point for an organization that can evolve and improve over time. It is rooted in fundamental key principles, and the starting structure reflects those principles. This is a foundation that will grow and change over time and the mechanism is within it for that change to occur.
Why is it needed?
Since it was created, Bitcoin Cash development has relied solely on donations. Part of the reason funding wasn’t sourced from the coinbase reward sooner was due to concerns over how the fund would be managed and distributed.
We established the Global Network Council to solve this problem. It empowers the ecosystem to build and sustain a free, open network that operates at a global scale, inviting that same ecosystem to decide where infrastructure funding is needed the most.
Does it align with Bitcoin’s principles?
The key principles of Bitcoin, as set out in the whitepaper, guide Bitcoin Cash development today. The network is secured by incentives, cryptographic proof, and proof of work, and those same principles will also guide the Global Network Council as follows:
- “A peer-to-peer electronic cash system”
The Global Network Council continues the original plan for Bitcoin, as described in the title of the whitepaper: “a peer to peer electronic cash system.” The Global Network Council is here to make that happen by distributing funds for infrastructure development.
- “Based on cryptographic proof instead of trust”
The Global Network Council is made up of those who have demonstrably contributed the most to the network. To be eligible to join the council, stakeholders need to cryptographically prove their contributions to the network.
- “Nodes can leave and rejoin the network at will”
Bitcoin is a voluntary system. Anyone participating in the network does so of their own free will, and there is no obligation to remain or interact with others. Likewise, nobody is required to join the Global Network Council: stakeholders choose to apply.
- “The incentive encourages nodes to stay honest”
A Bitcoin network is made secure and stable by leveraging the economic incentives of participants. As stakeholders, members of the Global Network Council have a joint incentive to increase the coin price. This gives them a solid reason to, as Satoshi put it, “play by the rules.”
- “The system is robust in its unstructured simplicity”
Experimentation is an important part of Bitcoin’s development. The Global Network Council is one such experiment, and it is designed to be a simple system that works by rewarding those who are committed to the network’s success.
- “Any needed rules and incentives can be enforced with this consensus mechanism”
Nakamoto Consensus is the foundation of Bitcoin. The Global Network Council itself is an extension of this consensus mechanism. Any needed rules and incentives of the council can be enforced by Nakamoto Consensus.
Stakeholders and council structure
Three co-equal categories of network participants can be proven, through the above principles, to be genuine stakeholders within the network.
Who are the stakeholders?
- Developers: those developing and maintaining the network’s reference protocol implementation. Developers can prove their contributions to the network through the code being consistently run on nodes.
- Miners: those providing the hashrate to the network. Miners can cryptographically demonstrate this by proving they were the recipient of each coinbase transaction.
- Majority holders: those consistently holding the most coins on the network. Holders can cryptographically prove their current holdings, and the cumulative coin age of those holdings proves consistency.
What roles do different stakeholders have?
The developer team building the reference node implementation will host the annual Global Network Council meeting. They will help list projects seeking funding, preside over meetings, break vote ties, and implement the decisions reached by the council.
Miners and holders
Miners and majority holders will vote on infrastructure funding allocation. Miners have the most votes, while holders are the only stakeholders that can present fund-seeking infrastructure projects and propose council changes to be voted on during the meeting.
Earning and casting votes
Once a year, we’ll invite miners and holders to apply to join the Global Network Council. During this application process, we’ll calculate the number of votes they’re entitled to based on the cryptographic proof of coinbase rewards or holdings they share with us.
For holders, there will be a blind submission process to cryptographically prove holdings so identities can remain hidden. Likewise, we won’t reveal any figures until the selection process is complete, so only invited stakeholders’ figures will be shared.
How are votes earned?
Miners, or collections of miners, can earn a total of 52 miner votes. This number is inspired by the approximate 52,000 blocks mined each year. For every 1,000 blocks a mining entity finds within the space of 12 months, they are entitled to one vote.
Holders can earn one of 21 holder votes by proving they are one of the top 21 coin holders. This number is inspired by the network’s limited supply of 21 million coins. Each holding entity can only cast one vote during each Global Network Council meeting.
How are votes cast?
Miners and holders have a joint total of 73 votes to cast, and these votes will take the form of SLP tokens. During the Global Network Council meeting, miners and holders will receive their voting token (or tokens) to the address they gave us when they applied to join the council.
When voting opens, the stakeholder will be able to cast their vote by sending this token to the address associated with the project they want to fund, which we’ll supply during the meeting. As a result, voting is permanently and publicly recorded on the blockchain.
Do stakeholders need to attend the meeting?
For stakeholders to cast a vote, they need to either attend the meeting in person or send a representative in their place. This representative can be anybody, but they will need to provide cryptographic proof that they have been authorized to represent the stakeholder.
As long as non-attending stakeholders have a representative present at the meeting, they will receive their voting token. This means the actual stakeholder (the voter) will be able to cast their vote from any location and stay anonymous if they prefer.
Funding and eligibility
How will the fund work?
The funds raised by the new coinbase rule will finance infrastructure development in two different ways:
One goal of the fund is to finance Bitcoin Cash development so it can become sound money for the world. To make that happen, 50% of the fund will finance the work done by the reference node development team, which is currently Bitcoin ABC.
This portion of the fund will not be governed by miners or holders. Instead, we’ll use it to hire a growing team of technical talent so we can progress the Bitcoin Cash roadmap more quickly and provide an increasingly solid ecosystem for businesses to build on.
Another goal of the fund is to finance other infrastructure-related projects (outside of the Bitcoin Cash roadmap) that will further improve the network and help drive adoption. 50% of the fund will finance these types of projects.
This portion of the fund will be governed by miners and holders. Projects will receive funding if they accrue the most votes from stakeholders during the meeting, and Bitcoin ABC will distribute the funds accordingly.
How do holders put forward projects?
As we mentioned above, holders are the only council members that can decide what the Global Network Council will vote on. Each holder gets to propose one infrastructure project that they would like to see financed by the fund, which means a total of 21 projects can be put forward for the council to vote on.
Alternatively, instead of putting forward a project, holders can propose a change to the council itself. For instance, they could propose a change to council proceedings or structure. For this type of change to go ahead, the proposal would need a supermajority vote of 75%.
What makes a project eligible for funding?
Infrastructure projects that are eligible for funding fall into two categories:
Academic projects, such as advanced research into pre-consensus models, are funded in the form of research grants.
Entrepreneurial projects are seed-stage ventures, funded within an incubator model similar to Y Combinator. Miners and holders will retain an equity stake in future profits, which will be sent to the same address as the coinbase reward.
Joining the Global Network Council
We’ll be inviting miners and holders to take their place on the Global Network Council before the Bitcoin Cash network upgrade in November. To get notified when applications open, subscribe here.