What is the difference between BTC and Bitcoin Cash funding models?
The funding models for Bitcoin (BTC) and Bitcoin Cash (BCH) illustrate distinct approaches in sustaining and developing their respective blockchains.
In the early days, Bitcoin's protocol development relied on voluntary contributions, with the establishment of the Bitcoin Foundation in 2012 seeking donations from the community and Bitcoin-related businesses. The landscape shifted in 2014 with the founding of Blockstream, a for-profit company specializing in blockchain-related products.
Blockstream's focus on off-chain transactions via the Lightning Network and its hiring of many key Bitcoin developers raised concerns within the Bitcoin community due to perceived conflicts of interest. Additional concerns were raised when it was discovered that Blockstream received funding from AXA Strategic Ventures and the Digital Currency Group, a venture capital firm that receives support from MasterCard.
Ongoing financial backing for BTC development is characterized by a diverse landscape, involving contributions from both for-profit and nonprofit entities to safeguard the cryptocurrency's codebase.
On the other hand, Bitcoin Cash's funding model centers around decentralized donors and voluntary contributions after the 2017 split from BTC. Different node implementations within the Bitcoin Cash ecosystem depend on the support of donors to sustain their development efforts.
Notably, Bitcoin ABC, the initial reference implementation, faced resistance when proposing an 8% tax on newly-minted coins and transaction fees. In response, a group of developers created Bitcoin Cash Node (BCHN), rejecting the tax proposal. Bitcoin Cash's community demonstrated its ability to influence development decisions by forking away from Bitcoin ABC, emphasizing decentralized governance.
The ongoing funding for Bitcoin Cash node implementations utilizes tools like Flipstarter, an implementation of an assurance contract. This allows anyone to create a fundraising campaign, and contributors pledge on-chain funds. Once the funding goal is met, the collected funds are instantly sent to the campaign creator.
Learn more in our deep dive into the differences between BTC and Bitcoin Cash.