Why a Bitcoin clone and not a DAC?

My first impression of Zcash is that it really seems to be the best privacy solution out there. But why it has to be implemented as an inferior crypto 1.0 blockchain? There is absolutely no need to repeat the mistakes of Bitcoin, like proof of work, lack of governance mechanisms, giving new coins to miners (ok, at least you give some part for real workers and investors), halving of issuance rate every four years…

I suggest that you look this whole system as a decentralized autonomous company rather than just a currency. When the system handles a lot of real value, it’s not going to work well as a normal open source project that lacks governance mechanism and is basically an anarchistic organization. It’s required that a system (that handles a lot of value) has some kind of clearly defined ways of conflict resolution.

Bitcoin is now in deep problems because there is no clear way of deciding things like blocksize. Bitcoiners just have to argue and fight, there doesn’t seem to be any constructive way of making the important decisions.

When you look at the point of view of DAC, it is clear that one good governance mechanism is to give voting power for company shares. Another solution would be giving voting power for miners, but that’s not really a good choice. Miners are just block producers. They are workers, not owners of the DAC. It’s better to give decision power for the owners and not for workers.

In your case the DAC would be a company like Paypal. It will produce a payment network and issue a token that customers can use. It will collect payment fees from customers so that it can be profitable or at least cover all the costs that the service demands. It will have workers (block producers, developers, marketers, etc.).

I don’t really understand why anybody would like to use proof of work these days. Isn’t it obvious that POW will result in centralization and massive wasting of energy? You get what you pay for, and POW-systems pay for people to use energy. If new tokens are issued as a subsidy for block producers and value of the tokens rise very much, that will lead block producers to use enormous amounts of electricity. Environmental problems will be obvious. It will also lead to centralization because of economies of scale.

Some of you probably already saw where I’m coming from. Lately I’ve been mostly interested in Bitshares because it has the most elegant solutions for blockchain governance that I’ve seen. Core token owners have voting power and they elect witnesses (block producers), committee members (who control the blockchain parameters like fees) and workers (mostly developers so far).

Governance problems of Bitcoin should have shown already to everybody that it does have very inferior system of blockchain governance. I really don’t understand why people (like you) are still so eager to copy it’s system with all the flaws.

BTW, there is also a possibility of implementing Zcash to Bitshares. This way you wouldn’t need to build your own infrastructure, you could just use already existing blockchain.

This would also give Zcash users an option for price stable assets which I think is quite necessary for future. Most people around the world are not interested in using very volatile currencies. They are very inconvenient to use everyday and are mostly good only for investing and speculation.

You can also make money with this option. If you implement Zcash to Bitshares, you can issue a fee-backed asset at the same time. An FBA is like any other cryptoasset (you can transfer it like any other coin) except that it has one powerful feature: it will get dividends every time somebody makes Zcash transactions in the blockchain. It’s like a mini-DAC in a DAC (where the FBA is the share of mini-DAC). FBA-owners have incentive to develop, fix bugs and market the particular feature, because they will get paid more when more customers use that feature.

You can do crowdfunding by issuing FBA and selling it to people in exchange for development funds. This way you can give large crowds an incentive to market Zcash and get excited about it. This is a superior way compared to proof of work mining – people are paying for development of the technology, not for electricity.


Hello, Samupaha. Thank you for writing such a long and content-ful message. To be perfectly honest, I don’t really understand much about Bitshares. It sounds interesting, and I’d like to learn more, but I’m sooooo busy trying to get Zcash 1.0 out the door…

I listened to your Epicenter Bitcoin interview and that explained why you are going with Bitcoin source code. It’s the most secure because it’s oldest and thoroughly tested.

But the problem is that we can already see the weak points of Bitcoin and those have nothing to do with quality of the code.

Proof of work will lead to centralization (because of economics of scale). Because the lack of governance mechanisms in the blockchain you will certainly face time wasting fighting when big decisions are needed in the development. We can see this right now with Bitcoin: it’s unable to do any decisions regarding scaling. If they can reach some consensus, it will be through long and painful process. Even if they can scale up enough, there will be other problems in the future which will be also very hard to resolve.

So why you would want to copy the problems of Bitcoin? It means that you will be very busy for a long time because you’ll be wasting your time to fight problems that are direct result of bad overall blockchain design. This is about bad economic incentives, not about critical bugs in the source code.

Your project seems to be very cool, it would be shame to see it fail because of problems that could have been avoided.

PoW may have issues wrt centralization but philosophically, psychologically and economically it will always be far superior to any mechanism that creates tokens (valued as currency) at genesis and distributes it to arbitrary stake holders who are supposed to act as used car salesmen down the road.

Securing the network comes first before decentralization on a broader scale. If PoW is wasteful at it’s current state, then research and development need to be done to come up with more efficient methods to mine and no one is stopping anyone to achieve that. It is at least an option for the future adopters.

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“Securing the network comes first before decentralization on a broader scale.”

… Are you a Zcash dev, @loonix?

Zcash needs to check out Decred. Part PoW, part PoS. 10% of their block reward goes to a budget which stakeholders can use to vote on projects and fund devs.

Even with @daira’s smartpone PoW algo, you need a budget system where stakeholders can vote built into the blockchain. It’s the only way to keep miners from becoming centralized.

No i am not a Zcash developer. You can find the list of devs on the team page Team - Electric Coin Company - Electric Coin Company

so called “governance” is a double-edged sword. It implies that the consensus critical code is mutable. that it’s nature can be changed after issuance.

yet immutability is a desirable attribute in a money. I daresay, a required attribute for a “good” money.

I like that it is nearly impossible to make any controversial consensus change to bitcoin. This immutability is by design. It is a key aspect of Satoshi’s genius that made bitcoin a success. If it were easy for humans to “govern”, then what would keep the 21 mil cap in place or any of the fundamental aspects? block reward amount? A majority dictating to a minority is like two wolves and a sheep deciding what to eat for dinner.

To all who espouse “governance”, I say no. There is another way. Just make immutable altcoins and let them compete on their merits and intrinsic nature. Build them, and set them free. The coin(s) that have the best monetary properties of fungibility (privacy), immutability, divisibility, decentralization will win, and others will fall by the wayside.

Those that can be changed by a whim of the economic majority (governance) may enjoy a brief time in the sun if their supporters push them enough, but eventually the market will pick those with the best monetary properties.