The five major mining pools called for "forced donations", are the BCH miners determined to pay 42 million yuan?

Text | Huang Xuejiao

Produced by | Odaily Planet Daily

According to Odaily Planet Daily, most coin holders and miners agree with the starting point of this "plan" - to raise funds for public chain development, but the way the "plan" is implemented is quite controversial.

"Donation is a good thing, but the scary thing is that it can be implemented with the consent of these four people." One netizen exclaimed. There are two crises hidden in this: the mining pool initiated by the "plan" has great computing power (power) and is quite arbitrary.

According to BTC.com data, these five major mining pools rank in the top seven in terms of BCH computing power, with a total computing power of more than 51%, reaching 54.5%, and have considerable voice.

After listening to the opinions of the community, Jiang Zhuoer and Roger Ver reiterated that this plan is only a "proposal" and that there is still room for discussion on the details of the "plan". Whether it will be implemented can be decided through computing power voting and other methods.

However, the "alliance" of large miners has been formed, and most small and medium-sized miners may have little say.

The Orphan Alliance

“There are three main factors in the competition for public chains: money, technology, and users. The battle for technology doesn’t happen overnight, but money can determine the outcome immediately,” Niu Fengxuan, founder of DAppReview, once asserted.

Indeed, without money, it is difficult to develop the underlying technology of the public chain, and it is also unattractive to developers of the upper-level ecology. In order to avoid development shortages and further expand the ecology, there is no doubt that the public chain cannot do without continuous financial support.

In addition to one-time large-scale fundraising, there are two other models that can bring "cash flow" to the public chain. One is a block reward model similar to Dash and Zcash (also known as a "taxation" mechanism), and the other is an inflation reward model similar to Tezos. The "plan" proposed by Jiang Zhuoer and others this time belongs to the first category.

The "plan" mentioned that when BCH is upgraded on May 15 this year, a six-month block reward donation will be launched. The donation accounts for 12.5% ​​of the BCH block reward. At the current price of $300 per BCH, the value of the donated funds in six months can reach $6.07 million (about RMB 42 million).

To ensure the participation of BCH mining pools, the “plan” states, “We will orphan BCH blocks that are unwilling to follow the plan.”

In the SHA-256 mining algorithm, a block that does not belong to the longest chain is called an "orphan block"; an orphan block is meaningless, and the miner who finds the orphan block will not receive any block reward.

In this "plan", the noun "orphan block" is used as a verb, which means that once the plan is "implemented", the mining pool that initiated the "plan" will use a certain computing power advantage to jointly exclude those mining pools that do not "donate", so that their blocks cannot be added to the longest chain and obtain corresponding block rewards. In order to achieve this goal, the collaborators are also called the "Orphan Block Alliance" by some netizens.

The "Plan" also disclosed that a Hong Kong company (in the form of a fund) has been established to receive and distribute funds, which will be used to pay for development costs.

Regarding the activation of this feature at the time of the protocol upgrade, the "Plan" stated that this will help ecosystem participants to promote it in a coordinated manner. Of course, this also means preparing the code for testing and deployment as soon as possible. "We will work with multiple BCH nodes to add code and promote this plan as part of the May 2020 protocol upgrade."

In addition to the content of the "Plan", Jiang Zhuoer, who was responsible for publishing it, also put forward some of his own thoughts on the donation process:

• Before the miner donation plan begins, the BCH Miner Fund will be established first and accept donations from miners, as well as donations from individuals and companies that are not miners. The foundation will run for a period of time to let the community see the effect. The decision-making power of the foundation will be determined by the donors voting in proportion to the donated funds (those who do not want to vote can abstain).

• Support miners to donate directly to development projects. For example, miner X can send n% of the output to the address of project A and m% of the output to the address of project B. If the miner is not sure which project to donate to, he can donate to the foundation, or refer to the foundation's fund allocation ratio and donate directly to various projects.

• What if some miners think that all projects are bad and do not want to donate or do not accept donations? In order to avoid the "tragedy of the commons", they have the power to send the output that should be donated to the black hole address and permanently destroy these coins - this is essentially donating these coins to all BCH holders.

It’s hard to collect 800 BCH.

The “Tragedy of the Commons” in Public Chain Development

After the "Plan" was released, it caused heated discussions inside and outside the community.

“We should have done this a long time ago!” Many BCHers said excitedly in various communities.

According to Odaily Planet Daily, most coin holders and miners agree with the starting point of this "plan" - to continue raising funds for public chain development.

Just in the middle of last year, BCH developers had difficulty in raising funds.

On May 30, 2019, Bitcoincash.org and other BCH organizations launched a total of 800 BCH (about $350,000) to support the continued operation of the development team. (Note: BCH currently has four major development teams, Bitcoin ABC, Bitcoin Unlimited, BCHD and Bcash)

“The 800 BCH raised this time is for the current needs of developers. This is the first stage. After that, we will also seek stable and continuous financial support. Before the BCH Development Foundation finds a long-term source of funds, it will probably have to rely on donations.” said David R. Allen, one of the initiators.

Unexpectedly, the long-term fundraising plan was met with cold water just as it got started.

Half a month after the fundraising was launched, Cryptopotato reported that the BCH Development Foundation had only raised 43% of the target amount. The fundraising funds were not doubled until some developers cried bitterly in the forum. But for developers, it is unknown what will happen in the next fundraising.

Like other decentralized communities, BCH developer fundraising faces an inefficient and unsustainable situation. This "plan" is obviously going to completely solve this problem over a longer period of time.

“Although there are some debates about all miners donating to developers, it is undoubtedly a significantly better solution than a few companies donating to developers. Sufficient donation funds will help speed up the development of BCH and quickly realize development plans on the roadmap such as Avalanche.”

The “plan” also reveals a sense of urgency, stating that BCH should seize the window before the bull market arrives to provide developers with sufficient food and grass to accelerate the development of BCH and user growth.

This "sense of urgency" is also partly due to its "younger brother" BSV. The two have similar large block expansion routes and payment public chain visions, but after the two separated at the end of 2018, BSV's on-chain applications and transaction volume quickly surpassed BCH. The figure below shows the daily transaction volume of BTC (yellow line), BCH (green line), and BSV (red line). It can be seen from the figure that outside of the stress test, BSV's transaction volume has overwhelmed the two.

Concerns about hashrate dictatorship

The voices of opposition focused on the form in which the "plan" would be implemented.

"Donations are not scary, what is scary is that these four people can implement it as long as they agree." One netizen said it well.

There are two hidden crises here: the computing power (power) of the "Orphan Block Alliance" is too great and it is arbitrary.

A BCH person said bluntly on the forum, "These mining pools (intend to) use computing power as a backing to exclude uncooperative blocks, (that is) modify the protocol in a substantial sense so that a portion of the new coins in each block will be directly or indirectly given to the team. This plan will change the fundamental nature of BCH: from a completely open public chain to a semi-private chain with an ambiguous nature that divides part of the new coins in the protocol and imports them into the hands of specific people. Some people may think that this is a last resort for survival. But considering the long-term promotion, investment and talent attraction needs, we don’t really know whether it is cost-effective... The mining pool uses computing power to force the redistribution of coins. I don’t know if the same group of people can collect taxes on any coin or any transaction on the chain. As long as the public relations are done well, there is no taboo."

The "Orphan Blockers Alliance" announced this "mandatory plan" without public discussion, which runs counter to the decentralized decision-making mechanism of blockchain.

The Orphan Block Alliance is not unaware of this. It stated in its "Plan" that "because this plan is unprecedented and deviates from traditional practices, some people in the community may have reservations or oppose the plan. But (we believe) the conditions are ripe."

After listening to community opinions, the Orphan Blockers Alliance seems to realize that this problem may be more serious than imagined.

On January 25, Bitcoin.com (Roger Ver's website) issued an announcement that the "plan" is still being developed. The proposed changes will not take effect until May 2020, which is enough time to satisfy as many parties as possible to discuss solutions. The chain will not be split due to protocol changes. Miners can choose to terminate the fund if the majority of miners find it inefficient, unfeasible, or otherwise detrimental to BCH or its business.

In his updated blog post, Jiang Zhuoer called for a public vote on whether the "plan" should be implemented.

"I hope to complete a three-month miner vote (possibly using bmp.virtualpol.com to vote). If 2/3 of the computing power votes in favor of the donation, then I hope the developers can write the donation plan into the May 2020 version upgrade. If there is not enough time, write it into the November 2020 version upgrade. The donation will last for 6 months until the next upgrade." Jiang Zhuoer wrote.

But now that the big miners have formed an "alliance", most medium and small miners may have little say.

"From the perspective of professional miners, this is indeed difficult to accept, because the net profit of miners is already low enough. Miners who do not reinvest their profits will be left behind in the fierce competition, and their market share will shrink, which is inevitable. More importantly, the motivations of miners are often inconsistent with our needs (pursuing future benefits). If they do not have a vision for the future of BCH, there is really not much reason to care about the development of BCH." The analysis of a BCH forum blogger is very pertinent.

Even if some miners are willing to make certain sacrifices for long-term benefits, in the short term, miners will face a halving of block rewards and a 12.5% ​​"tax" on the basis of low profits, which is a huge challenge. One netizen suggested that if the computing power is reduced sharply, it will also pose a hidden danger to the security of the BCH network.

Hong Shuning, a digital currency analyst, expressed concerns about the use of donations. "The key lies in whether miners can freely choose the recipients of donations. If yes, how can they avoid donating to themselves? If no, how can they avoid being manipulated by a few people?"

In response, Jiang Zhuoer said on Weibo, "You can decide how to use the money you donated, it's not a big problem."

But this begs the question: if many passive donors do this, then does this “plan” still make sense?

Of course, the "plan" is still in the discussion stage, and the details still need to be filled in and improved, so we might as well wait patiently.

It is worth mentioning that in May 2018, Bitmain’s BCH development team, Copernicus, proposed a block reward model similar to Dash. However, BCH was on the eve of a fork war at the time, and although the proposal sparked heated discussions, it was ultimately not implemented.

If this "plan" can be successfully implemented, some BCHers are already wondering "whether other public chains will follow suit."

However, observing the particularity of BCH, it may be difficult for other public chains to implement it.

First of all, this is a "tax payment" plan proposed by the big miners, which is contrary to their own role positioning and short-term interests.

Secondly, among the mainstream POW currencies, except for BSV, I am afraid that no other currency can achieve a high degree of consensus among stakeholders and concentrate computing power here.

After all, do you think this "plan" is a good one?