Adopting Options to Incent Cryptocurrency Developers, Take BCH as an Example
The incentive of cryptocurrency development has always been a troublesome issue. Almost all the coins and chains are facing the situation that developers always fight so poorly.
BCH hopes to solve this problem at the beginning of this year by sharing part of the coins from the mining reward to the developers. However, it remains on ice, with the further decline of the price, its developer incentive issue will become the most concern.
This article aims to provide a solution by using options to motivate developers, which is suitable for the current dumping situation. We take BCH for example; the plan is as follow:
Now BCH’s price is $180. So, the first step is the community set up a fund-raising organization to raise 10000 BCH. Set an option for the raised donation, one year or more later, allow the designated developers to exercise the options at a price of $1000.
In the form of a white list, some developers are designated to subscribe to the option. The subscription shares and exercise price shall be confirmed in the form of a contract. The contract also needs to specify at least some tasks of the developer, such as completing the development of the roadmap.
If finally the option is exercised by the developers, the entire raised donation will earn $10 million, that is, the developer buys the 10000 BCH at the price of $1000. And 100% of the raised BCH will be returned to the donors according to the original donation proportion.
If the option is not exercised finally as BCH’s price does not exceed $1000 at maturity. The fundraiser will return all the BCH donations. What’s the advantage of this plan?
The first is the low cost of fundraising. Now 10 thousand BCH only worth $1.8 million. And if the final option is exercised, the donor gets an extra BCH worth $820. If the option is not exercised at maturity, it means the donors can hold the option with zero cost.
Second, the raised fund does not need to be managed, at least the cost of management is quite low. Even the incentive effect doesn’t require supervision. But the premise that it works is that we assume that the developer’s completion of the coding works to promote the price.
The third is to provide a buying signal to the BCH market. Once the donation is set up, it is to give a BCH enthusiast in the market a bullish signal on BCH to more than $1000.
But all in all, it’s a good solution, especially now there are no good schemes in the community. The specific execution is as follows:
1. People with public trust in the community stand up and make a public statement to set up a fundraising organization and release details as well as cooperating with a legal and compliant third-party fair institution to conduct external contract justice.
2. Then raising the fund (BCH) and make it public.
3. Persuade the developers to claim the options.
4. Finally, just wait until the exercise day.
But the plan as a delayed incentive can’t motivate those developers who don’t have cash now. This way determines that developers are more single-handed. A wealthy developer may be able to claim an option and make zero income for development before the expiration, but he is more likely to have no funds to hire other developers to help him work together. As a result, alternative funding schemes are necessary.
Another drawback is no one knows whether the market price is caused by the features completed by developers. That is to say, it may cause dislocation of incentive for developers.