If you're embedded inside the Tezos ecosystem, there's a good chance you've heard rumblings about the newest proposal, named Ithaca. These upgrades are normally not controversial or exciting. There typically isn't much to debate either. But that's not the case for this upgrade cycle. In fact, this is the first time there's enough of a schism to not achieve the supermajority needed to advance this upgrade. That's right, Ithaca has been delayed.
Many other pieces have already been written on this, and most of them do a great job of summarizing the debate. Walter's series on XTZ.news for example does quite a nice job of presenting the liquidity baking debate. It's easy to extrapolate these controversies around liquidity baking and think it is the primary motivation for all the pushback that's been experienced. However, that's where I find myself disagreeing with a lot of the sentiments being thrown around.
No, I believe there wouldn't be as much friction surrounding Ithaca if there weren't such a large number of bakers and community members who simply felt ignored. To say that the disagreement is between LB supporters and no-LB supporters just isn't a very good characterization in my opinion. There's a few different schools of thought at play here and so I'll do my best to give everything fair context.
If you're wondering where I stand on the liquidty baking debate, I delegate all my voting power to my good friend @BakingBenjamins, who I trust to make the correct choice for our tez.
The LB Debate
The easiest group to point out is definitely the anti-Liquidity Baking crowd. What do they have against LB? Well that depends on who you ask. Some want it to end because of the token pair that's being subsidized - tzBTC/XTZ. There's a few problems with it, but it mostly can be summarized as: no centralized exchange listing, expensive to mint/unwrap BTC into tzBTC or vice versa, and often times it seems impossible to get Woorton (the minting authority behind tzBTC) that done unless you have an astronomical amount of assets.
Another faction of community members would rather see a different token in there besides tzBTC. USDC seems to be the consensus choice, but uh, that doesn't exist on Tezos right now, so it's a moot point. There was a competing Ithaca proposal in the first round of voting that nearly won that would see tzBTC replaced with USDtz. That being said, I don't think there's many who voted for USDtz, then switched gears to vote nay on passing Ithaca. (No sources, just my gut feeling.)
Third, I think there's a non-trivial amount of bakers + community members who simply feel left out of the democratic process of on-chain governance. We first got liquidity baking put in for Granada. There was some discussion around the liquidity baking feature, and so its had opponents since it's inception, but Granada ushered in 30 second block times, and many felt that to be too important of a feature to delay.
Jump ahead to the Hangzhou upgrade. Here we see a competing proposal injected, with the only difference really being that it switched tzBTC to USDtz. It proved to be the closest vote in Tezos history at the time, but still didn't generate enough support. There are a few problems with this, but the biggest is that it was arguably not given the same fair consideration from everyone.
For starters, the competing proposal had to be put together by the community. Nomadic Labs, which is paid by the Tezos Foundation, was either unwilling or unable to help in an official capacity with this competing proposal. The counterpoint is of course, Nomadic works at the discretion of the Tezos Foundation, and as such has no obligation to anyone else.
It was a scramble by the people involved to get their competing proposal injected. It was on the "ballot" for less time than the one put forth by Nomadic, it also doesn't carry the reputation that Nomadic brings. (Remember, I'm not saying this is a fair criticism, but it is a criticism.) I can empathize with those among us who would have liked to see at least a couple different proposals put forth by Nomadic Labs. It goes against decentralizatoin, but it could be worth it if it advances the ecosystem and helps us achieve consensus.
In the end, Hangzhou passed the final vote without much difficulty or controversy.
If we jump ahead to the initial Ithaca voting period, we are once again presented with only a single proposal from Nomadic Labs, while the USDtz team was under pressure to get the proposal injected. Unfortunately, the competing proposal once again lost under similar circumstances as Hangzhou. It was close, injected late, and attracted more FUD than it's counterpart.
After the Nomadic proposal passed the initial vote, there's a testing period before one more vote. The final vote requires a quorom of enough bakers to participate, and it needs to be a combined 80% of yay and pass votes in order to succeed. One of the largest, long time Tezos bakers called PosDog voted nay, which really set the tone for the rest of the period.
Call it a protest vote if you want. Get annoyed that Tenderbake won't be implemented when we all originally thought. But please have some nuance about this topic and realize that there is a lot more going on beneath the surface than some bakers complaining about their tez being taxed unfairly. Nobody voted against Tenderbake, that's not what any of these nay voters wanted. I don't believe anybody who is baking tez would be opposed to improving the protocol. To even suggest that there are anti-Tenderbake groups is disingenuous.
None of this is to say that the Tezos Foundation's reasons for not simply putting out competing proposals aren't valid and legitimate either. My thesis is just that a lot of this debacle could have been avoided, for better or worse, if Nomadic could have injected multiple options for us to vote on. Does that open up the door to them being strong armed in the future, or that by extending the community this favor that they're setting themselves up for more clashes later? Perhaps. But I don't think that what is being asked for is unreasonable, and if that's all it takes to make enough people happy to keep the tez train moving , is it not worth considering?
Even though Ithaca didn't pass the first time through, it should hopefully be a win for the governance of Tezos. It can look ugly, but I really think that this will help the chain achieve the consensus needed. It shines a very bright light on why decentralization is so important. If we were sufficiently decentralized, then it wouldn't matter as much what the actions of a single baker mean for the rest of the network. We don't need to give singular groups that don't align with our interests outsized voices. Simply having the loudest voice does not entitle anyone to more than their fair share.
Delegate to a baker you know you agree with. Reach out to them, ask them questions, and be happy to pay a higher fee on your rewards if it means you don't need to worry about your tez being used for something you're not okay with.
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