SmartBCH's Fee Burning Policy is Counterproductive and Should Be Removed

I saw the recent post about SmartBCH having burned its first full BCH token. While I commented on that post explaining why this is a bad idea, I thought it would also make sense to create a top-level post for more visibility, so here it goes.

In order to burn BCH, SmartBCH must charge fees in excess of what it would otherwise cost to operate the sidechain. In other words, without the burn feature, usage of SmartBCH would be cheaper. Does this sound at all familiar? It should, because that is a large part of the reason I, and hopefully most of you, use BCH instead of BTC. Excessive fees discourage use. Why would the SmartBCH team want to discourage people from using their product?

The SmartBCH team claims that the burn feature of SmartBCH is a way to "give back" to the BCH community. That is, to an extent, true. However, doing this is not free. By making their service artificially expensive, they discourage its use. Usage of SmartBCH itself also increases the value of BCH, so by artificially increasing the fees to use SmartBCH they are causing BCH to be less useful, decreasing demand for BCH, and hurting the value of BCH.

Another way to analogize the burn feature of SmartBCH is to compare it with a government transfer payment, or welfare. In this case, the "taxpayers" are SmartBCH users and the welfare recipients are people who hold (not use) BCH. The one saving grace here is that this transfer payment is 100% efficient due to no overhead required as there is with traditional government transfer payment programs. However, at the end of the day, the burn feature is robbing people trying to use BCH in order to subsidize people who simply hold it. Not good.

The overall effect of SmartBCH on the value of BCH will probably be positive because its net effect is to create more utility for BCH. However, that has nothing to do with the burning feature and everything to do with SmartBCH's existence and usefulness for actually doing something. We should encourage more usage of SmartBCH, not less.

TL;DR: There ain't no such thing as a free lunch. The burn policy incentivizes "hodling" behavior rather than actual usage of BCH, and that is bad. Stop it.

Thank you for coming to my TED talk.