BCH mandatory miner tax: take 2

On February 1, 2020, Jiang Zhuoer, CEO of major BCH mining pool BTC.TOP, revised his stance on the controversial miner’s tax proposal. This comes after an initial announcement he has made last January 23 that sparked rampant controversy, pronouncing that top BCH miners have agreed on a plan to divert 12.5% of the network’s block rewards to infrastructure development. By threatening to orphan blocks of miners who refuse to contribute fractions of their rewards, these mining pools conspirators consequently drew rampant criticism and opposition from the mining community.

Visibly alarmed by the extent to which the community responded negatively forced one of the top BCH mining pools, Bitcoin.com, to withdraw its support for the tax plan in its current form. This came after anonymous miners threatened a hash war 2.0 in response to the proposal, which undoubtedly could have led to a chain split. After the latest announced changes, it remains unclear whether the other mining pools shall continue to sponsor Zhuoer’s latest recommendation. With the walk-back of the proposal by Zhuoer, and a newfound willingness to modify details of the plan, the possible hash war may be averted.

Zhuoer’s mining pool is responsible for most of the BCH hash power. He has admitted to owning 3,500 peta hash and claims to influence almost 10,000P hash power. Nearly 50% of BCH hash power directs from undesignated mining pools, any adverse impact on mining profitability could result in the network losing significant hash power. Although authors of the measure claim it is founded on positive intentions, the implementation is criticized for being misaligned with the concept of a decentralized community. And more than that, it could have a direct issue in terms of network security.

Although Zhuoer still plans on establishing a foundation entitled BCH Miner Fund, he now proposed that miners donate directly to specific projects within the ecosystem as the fund will operate as a trial for an indefinite period. This fund would distribute funds based on the wishes of the donors in proportion to their donations. For miners uninterested in supporting any BCH project, including the fund, Zhuoer has recommended that miners send their coinbase to a BCH Black Hold to “destroy these coins,” which Zhuoer claims would mean all projects holding BCH would see benefits in the supply cut.

Furthermore, Zhuoer also proposed reducing the requisite 12.5% donation to 3% by the middle or end of 2020. He as well insisted that 1% is likely to be sufficient in 2021. To get his plan approved, Zhuoer plans on conducting a three-month election where miners would use their hash rate in deciding on the proposal, which, if passed, he hopes developers would integrate the plan into the May 2020 protocol upgrade.

To secure enough votes for his plan, Zhuoer recommends mining at a loss to assure that miners who solely mine for profit would not mine in BCH and further proposes that keeping the BCH mining profits lower than BTC mining profits for independent miners to focus their attention elsewhere. Despite all these changes, many of the critiques from the BCH community on the proposal still stand.

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