The ETC Cooperative is withdrawing its support for the ECIP-1098 Treasury proposal.
We spent many months collaborating with IOHK on reworking the published proposal. It became apparent over time that IOHK's vision of a treasury was sharply at odds with our expectations.
The final straw was IOHK's rejection of the “sweeping mechanism” which Bob had proposed. Unspent client team funds would have been swept forward into the community grants pool. That mechanism was intended to ensure that high USD equivalent funding due to rising ETC prices or due to differences in spending across client teams would not end up as excessive private profit for the client teams.
That restraint on private profits was a "hard no" to IOHK but was a "must have" for ETC Cooperative.
Without adequate systems in place to ensure transparency, accountability and ultimately a capped profit margin, the treasury system that IOHK desired was never going to be accepted by the community and with valid reason.
Does that mean that ETC Cooperative no longer advocates for a treasury?
No. It means that ECIP-1098 was no longer a viable proposal.
Chris Hitchcott just wrote an excellent article summarizing anti-treasury arguments along with commentary on how badly a contentious chain-split might play out. It is very long, but well worth the time to read, or at least to skim. We agree with many of Chris's points, but believe that it is still possible and necessary to institute a treasury which would be a net positive for ETC while avoiding the shortcomings of ECIP-1098.
Why consider protocol intrinsic funding in the first place?
Currently, all of the funding for ETC protocol and ecosystem development is protocol extrinsic funding from Grayscale and DFG. That funding is fragile. The Coop only has an agreement with Grayscale until April 2022 and we are working on the assumption that funding will be discontinued at that time. Grayscale cannot and will not continue to be the sole source of funding indefinitely. In addition, the scope of work funded by DFG has shrunk down to a few individuals working on Core-Geth.
Unlike Bitcoin, which could likely be run pretty much “as is” in perpetuity, the Ethereum and ETC protocol and codebases need ongoing maintenance and protocol tweaking because of the added complexity of being a general computing platform. The crypto-economics are complicated and there is much more opportunity for attack vectors.
The outlook for ETC
As Ethereum transitions to Proof of Stake with the ETH2 changes, ETC will need more internal developer capacity to be able to maintain and develop the protocol. There is a real opportunity here for ETC to find its niche and differentiate itself as one of the very few blockchains with smart contracts on a proof-of-work chain.
To be clear, ETC Cooperative sees a bright future for the ETC protocol, irrespective of the fate of any of the current real world entities within the ETC ecosystem (ourselves included). To quote an individual who has been around since the project's earliest days:
"ETC is a cockroach, in the best possible ways"
Throughout this process with ECIP-1098, our worst failing was that discussions happened behind closed doors for far too long. That process began with good intentions - to revamp the proposal into a healthy state which would address the many concerns which had clearly been communicated. It was self-evident that the proposal as originally published needed lots of iteration before it stood any chance of adoption. Unfortunately that process dragged on for months and the proposal never got to a state where it was ready for release so we never got to the productive public discussion which we hoped to enable.
We apologize for our part in this sequence of events. The outcome was sharply at-odds with the transparency which is a core value of the ETC Cooperative (as evidenced by our regular reporting and general conduct), therefore we will work to ensure that future proposals follow a more transparent and open process.