There is a debate right now among the Bitcoin Cash developers and stakeholders about tokens. I believe that we need tokens that are permissionless, unstoppable, anonymous, peer-to-peer, irreversible, trustless. Few people contest these requirements, but the debate have somewhat been over what trustless and permissionless actually means.
This is somehow surprising, that a crypto currency that has all those requirements, would meet resistance when trying to build a token with the same properties as the parent cryptocurrency on the same blockchain.
Example: A company have decided to create a EUR backed token with the exchange rate 1 to 1. The company behind this have no need for smart contracts, they only need to be able to issue and destroy tokens once in a while. After they receive a SEPA transfer from a customer, the customer is being sent his tokens directly. When the customer wants to redeem, he just sends the tokens back and get a SEPA transfer to his account the same day.
Since the tokens are built into the base layer of Bitcoin Cash, the miners (and nodes relaying them) validate the transactions. SPV wallets can receive tokens and every Bitcoin Cash user have the ability to hold tokens in any kind of wallet.
Now, the philosophical question is: Is this a trustless and permissionless token? You can trust the network and the miners because of Proof Of Work. If you can't trust the PoW, then Bitcoin is broken anyway.
One could argue that it's not trustless since every holder need to trust the issuer to hold up his end of the bargain and redeem the token. One could also argue that it's not permissionless since the issuer could blacklist certain tainted tokens, require KYC to redeem the tokens, etc.
When we talk about trustless and permissionless blockchains, what we actually mean is that we trust PoW. Trustless means you trust the blockchain to hold a correct ledger. Permissionless means that you may transfer your asset to anyone without asking for permission. Being able to redeem your token at a certain price is simply an agreement between two parties. These kind of agreements are outside the scope of the operation of the blockchain. You can always transfer the token to the issuer and expect it to be redeemed, but if you can't, it's not the blockchain's fault. Just like if you would buy any other product and not getting what you paid for is something that needs to be settled outside the blockchain. I would say that this argument that tokens cannot be trustless and permissionless is false.
The empirical evidence also supports this. The best evidence we have is the USD Tether. The USD Tether have been subject to a long trust debate in the Bitcoin space. The USD Tether is a token that is very hard; impossible for most people, to redeem. Yet, it still holds the value of 1 USD and is traded on many exchanges. The USD Tether is the most successful token on Bitcoin ever. This is despite the fact that only modified full nodes can hold the token, it's not supported by SPV clients and mostly exchanges use it.
There are more examples from the real world. Music festivals are expensive and complicated to run, and sometimes they end up filing for bankruptcy before the event. This have happened many times in Sweden. Every time this happens, other competing festivals that are happening around the same time offers discounts to anyone with a ticket from the cancelled festival. Here we have a case of the issuer (the festival) going bankrupt and ceasing operations, yet their tokens (the ticket) still hold value because the market have decided that it has value. It's a good way to acquire customers that otherwise would have stayed home.
This is why it's important to have permissionless tokens that is not dependent on the issuer. In any kind of authority based 2nd layer token protocol, tokens with defunct issuers will immediately lose it's value. Not to mention the risk of the same thing happening if their servers go offline of they forgot to pay the bill to the company that was supposed to run it.
If you take a step back and think about it, the debate is somewhat bizarre. Because some people don't believe that trustless tokens exist anyway, it's ok to propose something that is definitely not trustless and permissionless. It's like hitting yourself in the head with a hammer because you had a headache anyway.


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Buying a token implies trusting a central authority: the issuer. A token doesn't have any other meaning than one given by this authority. Your example of the festival is flawed because either you are simply describing the transfer of authority from one centralized issuer to another, or the authority and trust remains at the festival who can freely issue new tokens diluting the value.
The example of Tether is flawed because it shows exactly the trusted nature of a token. Sure you can transfer tethers freely but this does not remove the trust in the issuer at all. Also, I would think that calling it "the most succeful" is rather odd; surely tethers are the example of how we *don't* want to use tokens?
A token without central issuing authority already exists on chain: BCH. There is little benefit in allowing more types of BCH. There *is* a benefit in enabling tokens that are issued by a central authority, but such issuer only *benefits* from being able to control the transfer as well (as in Tokeda). Why wouldn't the issuer want that?
If we want to invite issuers to issue tokens on the Bitcoin Cash blockchain, we need to give them as much power as possible.
   2yr ago
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Tether is an excellent example of how tokens that are seemingly permissionless to transfer, are in fact completely permissioned. It is clearly not detached from its redemption process. Once funds were stolen from its treasury wallet, this transaction was retroactively invalidated with an after-the-fact rule change despite already being confirmed in the blockchain. Thus, transfers completely depend on your trust in the issuer.
For the example of the music festival ceasing operation, other festivals can simply airdrop new tokens for their events onto the holders of the now frozen token for the cancelled festival.
It is in the interest of the token issuer to process token transactions fairly, very similar to how it is in the interest of Bitcoin Cash miners to process BCH transactions fairly. Additionally, any full node can audit the validity of token transactions, just like any full node can audit the validity of BCH transactions. It is therefore strange to insist on removing all dependencies on token issuers, while being okay with depending on miners. Not to mention the fact that redeemable tokens are always fully dependent on its issuer by its economic nature.
I've written more about the counterargument (including the Tether example) here: There is no such thing as permissionless transfer of redeemable tokens
   2yr ago
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In the (OP_)GROUP meeting, there was raised concern regarding GROUP's potential to impact BCH's function as money in a negative way.
But I don't think this is any different from becoming a huge success. And I don't see this as a problem since the transactionfees are paid in BCH and growing the adoption of BCH.
Unless there are some computational problems GROUP introduce that doesn't scale like regular transactions. Am I missing something here?
   2yr ago
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Emil (author) is right in every aspect. I can't believe people are debating him.
Just read the article with understanding.
   2yr ago
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OP_GROUP can be used with Cash Shuffle eliminating ability of the issuer to track tokens . So issuer will NOT be able to prove to court that he is lawfully refusing to redeem said tokens, no?
   2yr ago