Philosophy when adding new functionality to Tezos. Keep it first-party not third-party

Philosophy and Economics
1

With the liquidity baking implemented and in use now, it may be important to use this time to understand how to implement future functionality to the Tezos Blockchain. I have been reading through the threads regarding LB it seems there is some consensus that there is an issue with how tzBTC is managed and minted. The ownership of tzBTC especially on the minting side is managed by a third party which can be an issue if they decide to stop cooperating or responding to individuals who want to make use of LB to it’s fullest potential.

I think for any future feature implementation, it may be better to not rely on any third party. Just as an example, if tzBTC minting was implemented on the Tezos blockchain itself, this could be a non issue. I know this example may not be the best since there are laws in certain countries that require KYC for buying BTC, but if that is the case then maybe some form of decentralized identification could be implemented into the blockchain on the layer 1 solution and be required to buy or mint tzBTC.

Ensuring everything stays first party will prevent anyone from stalling functionality and will keep the power decentralized and democratized. It will also mean updates can be done much quicker and without having to wait from a third party if they need to cooperate when making changes.

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2

Just curious, when was the last time you minted USDT or USDC?

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I don’t know if you are using minting and buy synonymously but I bought USDC on a centralized exchange rather recently. Why?

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Oh you bought it on a centralized exchange? How is that buying process any different than buying directly from Woorten, Sygnum, Bity, or BTC Suisse?

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This is just a discussion topic based upon what I have read here.
https://www.reddit.com/r/tezos/comments/owsimc/something_is_seriously_wrong_with_tzbtc/
https://www.reddit.com/r/tezos/comments/owytbf/where_do_we_buy_tzbtc_for_liquidity_baking/

I hope that helps give context

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6

I gotcha. Makes sense. It seems like Raphael probably asked them the wrong question about minting, when the gatekeepers don’t mint, but allow purchase/distribution of tzbtc by the keyholders as the graphic indicates on tzbtc.io.

Here’s a response I’ve gotten back from Woorten.

InkedScreenshot 2021-08-12 185858_LI
InkedScreenshot 2021-08-12 185858_LI1482×548 43.8 KB

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This is a really bad comparison. For example, if you have usdc on Ethereum, it’s super easy to bridge it over to Solana, Terra, Fantom, etc in a matter of minutes. This whole tzBTC situation is an abject disaster.

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Oh you mean that have more mass adoption on those coins and that was one of the ideas of why LB was enacted? color me shocked. the only abject disasters on here are your ideas of burning tf funds.

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I heard someone discussing an eip-1559 burn like scenario as a means to decentralize the network and burn TF funds. Idk tho :man_shrugging:

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Although the burn scenario may be worthy enough of it’s own post, I would like to remind everyone that this post is about maintaining the integrity of the chain by not allowing third party’s to have any control over the Tezos network/chain in any meaningful way. I feel like this is something that may be important enough to enact an update that alters how LB is handled on this network.

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11

I think you’re working with some pretty big misconceptions.

Please explain how a liquidity provider has “control of the network.”

And how is it possible to “mint tzBTC yourself on the tezos blockchain” without being the third party that others would need to trust? Even WBTC has a custodian.

Also, the provision of liquidity is a service that all delegates and delegators agreed to pay for. It’s a different activity than baking and has a different risk profile.

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Liquidity baking is protocol level. There’s a single tzBTC minter. What if something permanently halted that minting? Block by block XTZ is deposited into tzBTC/XTZ pair- chaos would shortly ensue. I suspect this is what they meant when saying “control” over Tezos in any meaningful way. The repercussions would certainly be meaningful.

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13

How so? What would happen and how does that constitute “control of the network”?

It’s a protocol level subsidy of a liquidity pool that can be turned off at any time and automatically expires.

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Sounds like you’re caught up on words rather than intent. Perhaps they should have used “influence” rather than “control”.

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I think you are right. ‘Influence’ in this context would fit better.

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OK, so please explain how they have “influence over the network.”

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Exactly as ZPE1333 said. They could just stop giving out (minting) tzBTC or they can put new restrictions on it just because they want to. They could also go out of business which means tzBTC won’t be backed 1:1 with BTC.

There are just a ton of variables at play when bringing in a third party. The weakest link when ensuring trust is a human. That is exactly why blockchain was built, to get rid of the ‘human’ factor. By bringing in a third party we are re-inserting humans back into the equation.

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18

So explain what their “influence over the network” is. I haven’t read a single point made that makes sense yet.

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Did you follow up with them after this email ? After I posted on reddit, and then I got the same email from Woorten as well. I was excited for a while, and then did everything they asked for KYC steps. And then… a few days past, no response, not even a refusing to service email from them. And yet, Woorton is already the best gatekeeper among the 4. BitcoinSussie finally replied to me they are evaluating the tzBTC related business. And that’s all, the rest 2 gatekeepers just unreachable at all.

I’m probably unqualified or something, somebody might can eventually minting/purchasing from these gatekeepers. But I can at least tell from my experience, the tzBTC part of LB makes me unhappy and yes, I should vote NO to this in first place for Granada if I knew the situation like this.

And what surprised me more is most people of our cummunity (coredevs, tezos commons, bakers, mod/admin on telegram/reddit, even Arthur etc) I disscussed with were all assuming tzBTC minting/purchasing (no word playing here, I mean add new BTC into tzBTC, not buying tzBTC from LB and rejoin LB LP) just works, and nobody tried or suceeded.

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I think you may be focusing on the wrong thing. This little bit sums up my thoughts on it to the best of my ability.

And what coredump said above me is a real example of what I mean by ‘influence’. The feature that was added (that we call liquidity baking) to the Tezos Blockchain is reliant upon this external third party for it to work smoothly and efficiently. If this feature was instead reliant upon itself (first party) to accomplish the task this third party is unable to do then this wouldn’t be an issue. Especially if it could have been coded in in the first place.

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