The ETC Cooperative Withdraws Support For The ETC Treasury

The ETC Cooperative is withdrawing its support for the ECIP-1098 Treasury proposal

For over a year the ETC Cooperative had focused its resources on the development and successful adoption of ECIP-1098, the ETC treasury proposal by IOHK. In light of our recent decision to discontinue support for the ETC treasury we have provided an in depth look at how exactly we came to this decision. Below we detail our concerns, expectations, and the reasons behind the withdrawal of support for the ECIP-1098 treasury proposal.

Why?

We spent many months collaborating with IOHK on reworking the published proposal. But, unfortunately, 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 refusal to consider the “sweeping mechanism” which Bob had proposed. Unspent client team funds would have been swept forward into the community grants pool. That mechanism ensured that high USD equivalent funding due to rising ETC prices or differences in spending across client teams would not result in 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 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 that would be a net positive for ETC while avoiding the shortcomings of ECIP-1098.

Why consider intrinsic protocol funding in the first place?

Currently, all of the funding for ETC protocol and ecosystem development is extrinsic 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 Grayscale will discontinue financing 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 run “as is” in perpetuity, the Ethereum, ETC protocol, and codebases need ongoing maintenance and protocol tweaking because of the added complexity of being a general computing platform. As a result, 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 maintain and develop the protocol. However, ETC has a real opportunity to find its niche and differentiate itself as one of the few blockchains with native 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.”

Transparency

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 — revamping the initial proposal into a healthy, more favorable state to address the many concerns communicated. It was self-evident that the original proposal 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 we hoped to enable.

We apologize for our part in this sequence of events. Unfortunately, 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.

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