Chia Founder Bram Cohen recently did an interview on Son of a Tech on a number of topics, but primarily on the 21 million coins that are not in circulation and held by Chia Networks, commonly known as the “prefarm”. The interview was really well done, and did not let Bram off the hook for the vague answers given. Unlike some, I am less concerned about the prefarm than others, because I see the utility of a currency reserve and ability to act as a treasury bank. I am a little concerned about the answers given by Mr Cohen during the interview, and I will detail the 3 I am most concerned with. But first I want to start with the points I like.
He starts off talking about “Bitcoin maximalists”, which is a term I am unfamiliar with but I can surmise the meaning of. And I dont think he’s wrong. The original philosophy of Bitcoin does not lend itself to being a non-volatile monetary unit and part of the reason is no central bank mechanism and I think a lot of the criticism to the prefarm does come from the philosophical difference between Chia and Bitcoin. He then discusses the mechanisms that they are using to raise money which is far more traditional than other cryptocurrencies. This is something I am hugely in favor of, and one of the things that brought me to Chia – the lack of any shady ICO plans.
First, the ambiguity surrounding the prefarm. Instead of just answering straight up that Chia Networks doesnt know what they will use it for, that they don’t want to use it unless absolutely necessary and that they will treat it like a strategic reserve rather than a spendable asset he went into this dance around answering the question – even when given multiple opportunities to answer. He said at one point that they would possibly lend it out, which I assume means like a central bank but could mean to their buddies.
|Son of a tech|
And I know it’s kind of like one of those weird subjects where it has to do with security as well as like putting everybody’s I guess, mind at peace surrounding that. To me, though, like it does sound like it’s difficult to say, for sure. You know that you couldn’t dump it? Because in theory at that point, you could
it would be harder, we have gone out of our way to make it so we have no reason to dump it, we just raised $61 million. And that’s the money we’re going to be using for development for a while. Okay, well, we have enough money in the piggy bank to keep going without selling any tokens and we set that up so we didn’t have to worry about it
The entire answer was incredibly unclear and I am less sure about the purpose of the prefarm before he answered it. He keeps saying that they dont need to spend the prefarm without saying they won’t. Towards the end of the interview he did talk about some controls being discussed, which might be a good idea or it might be a mechanism to offer themselves protections on the blockchain not afforded to anyone else. This is the problem with unclear answers.
Which brings us to issue two – governance. When asked about governance Bram’s response was deeply concerning. He said “yeah, so for the most part, you don’t want to do governance, right.” . This is clearly untrue, as most organization of the size he aspires to be use a governance structure to control decision making. The question was pretty simple, what controls are in place to control who can access those coins or change the access policy? And the answer seems to be nothing. There might be a good reason for the current structure, but there likely isnt a good reason to skirt the question twice.
The third issue the technical control that Bram talked about towards the end, mentioned two paragraphs above. The idea that the prefarm will have additional controls or security features allowing for the rollback and recovery of coins once transferred out of the wallet. This is a feature that if available, should not only be limited to the prefarm. Giving yourself additional protection that the community does not receive and saying it is for their benefit is pretty transparent.
Again, I think the prefarm is useful as a Central Bank / Treasury and would allow a qualified, independent board to set monetary policy required to smooth out the volatility of cryptocurrencies and allow for some form of fractional reserve banking, both very useful for capitalism. But they need to be more transparent about their plans, and the controls around those plans to ensure that those of us investing in this ecosystem are confident that we won’t have the value of that investment destroyed in a heartbeat.