Bitcoin.com, owned by Roger Ver, withdrew its support for a proposal that would coerce miners to divert 12.5% of the Bitcoin Cash block reward to a development fund.
Bitcoin.com Backs Out of Forced Development Fund
“As it stands now, Bitcoin.com will not go through with supporting any plan unless there is more agreement in the ecosystem such that the risk of a chain split is negligible,” said Bitcoin.com in a blog post.
The decision is presumably a response to heavy criticism. Bitcoin Cash supporters say there are less coercive ways to raise development funds. Bitcoiners used the proposal to call out Bitcoin Cash’s centralization.
“We think it is clear that the existing proposal does not have enough support, and we will be working to come up with a plan that is profitable for all the relevant parties and which preserves the fundamental economics of Bitcoin Cash.”
Roger Ver himself has not yet publicly commented on the matter.
The Mining Cartel’s Proposal
The proposal was initially pushed by a cartel of miners representing 54% of the network’s identified hash rate, or 34% of the total hashrate.
Jian Zhuoer, the CEO of BTC.Top — the largest Bitcoin Cash mining pool — announced the proposal on Jan. 22. His mining pool alone controls 25% of the identified hashrate. Other members of the cartel include Jihan Wu, the CEO of Bitmain and operator of AntPool and BTC.com and Haipo Yang of ViaBTC. Roger Ver’s Bitcoin.com was also a part of the plan, until today.
Bitcoin.com represented under 2% of the known hashrate, meaning the cartel still controls 32% of the network.
“Funding of infrastructure may often go overlooked or be underprioritized,” said Zhuoer in the proposal. Instead, the plan would divert 12.5% of the block reward to a Hong Kong corporation set up to legally accept and disperse these funds.
Based on current prices, the proposal would amount to roughly $41,000 in funding per day, or nearly $7.5 million in total over its six month duration. The majority of these funds will presumably go toward the Bitcoin ABC, the primary open-source implementation of the Bitcoin Cash protocol.
“Although many previous attempts at stable infrastructure funding have been tried with mixed results, we are optimistic this plan could be a great success,” said Bitcoin ABC of the proposal.
But the main point of contention — the cartel’s threat to “orphan blocks,” which deprives miners of revenue if they oppose the proposal by excluding their blocks from the chain. This is to “avoid tragedy of the commons,” said Zhuoer.
Ramifications on Network Hashrate
If accepted, the additional developer tax would make Bitcoin Cash less profitable for miners. As a result, the Bitcoin Cash protocol can expect a corresponding 12.5% drop in its network hashrate.
This is problematic because it reduces the security of Bitcoin Cash and makes hostile mining, such as a 51% attack, easier to execute. One such attack already occurred in May of 2019.
Bitcoin Cash is particularly vulnerable because it uses the same hashing algorithm, SHA-256, as Bitcoin. This means miners on the much larger Bitcoin network can switch over and attack the Bitcoin Cash blockchain with impunity.
What Bitcoin Cash Developers Say
However, there are few other ways to practically implement the development fund. According to prominent BCH and Electron Cash developer Jonald Fyookball:
“Other attempts/ideas to fund infrastructure via mining haven’t worked. I’ve seen suggestions involving everything from hashrate voting to p2pool, to covenants, etc. No disrespect to the great developers who come up with those ideas, but the reality is that all of those things are too complicated to have a good chance of working in practice, especially in the near term.”
In a conversation with lead Bitcoin ABC developer Amaury Séchet, he expressed concerns that the incentives currently in place for Bitcoin Cash will yield bad outcomes. Against their own best self-interest, developers are expected to work with inadequate funding, said Séchet. Such a scenario would result in a ‘tragedy of the commons,’ where incentives are structured in a way to encourage freeloading, leaving someone else to foot development costs while still reaping the benefits.
“This proposal is a way to address that problem. There are other ways, but it does not seems like they are getting traction, so I’m hopeful this one will,” Séchet added.
Community Raises the Alarm
The proposal quickly drew criticism. The Bitcoin community outright denounced the proposal, saying it emphasizes the issues of centralization on Bitcoin Cash. One influential crypto VC even called the coin a “centralized totalitarian regime.”
Even within Bitcoin Cash there was pushback to the idea, saying it threatens to fracture the community and create a “PR nightmare.”
Other alternative proposals from Bitcoin Cash fans called for less coercive methods of fundraising. The most popular of which would establish a smart contract for developer donations. Proponents claim that everyone, especially large holders, would benefit from more active protocol development through price appreciation.
Credit: Source link