After the block reward is halved, which one is more attractive to miners, BCH or BTC?

Since the birth of Bitcoin, miners have always been the most important part of the Bitcoin ecosystem. The first miner in history was Satoshi Nakamoto, the designer of Bitcoin. Miners invest computing power to pack blocks and process transaction information, which not only improves the complete functionality of the blockchain ecosystem, but also forms a moat for Bitcoin to resist computing power attacks. If there is no computing power to protect the smooth operation of the blockchain, it can be said that the framework system of Bitcoin has been defeated long ago. For example, BTG was successfully attacked by 51% computing power due to insufficient computing power. After that, BTG was basically suspended. Therefore, miners have made great contributions to the stable operation of Bitcoin for 10 years. Therefore, currencies under the POW mechanism hope to attract enough computing power to protect the smooth operation of the block chain.

Do miners like block congestion?

The source of income for miners is the handling fee + block reward. In the early days of Bitcoin when the transaction volume was extremely scarce, which was also the period when Bitcoin had the highest block reward, the early miners received 50 Bitcoins per block + a very small handling fee. It can be said that the early miners did not rely on transaction fees at all. As Bitcoin gradually matured, it has developed from a single block with a few transactions in the early days to the present - each block is filled with transactions, network congestion has become the norm, and the increase in transaction volume naturally generates more handling fees. When the average block capacity reaches 95% of the upper limit, the memory pool begins to expand, and users begin to continuously increase the handling fees, hoping to allow miners to write their transactions into the next block as soon as possible without experiencing delays, and finally the handling fees begin to soar.

Before 2016, miners earned about 50 to 60 bitcoins in transaction fees every day. After that, the miners' daily transaction fee income increased significantly to 250 bitcoins. Bitcoin transaction fees are rising at a considerable rate.

For short-term miners, they naturally hope that the upper limit of the block is as small as possible, limiting the transaction space, and it is best to make the average block capacity always greater than 95%, so that the competition for handling fees will become more and more intense. In the short term, the best block capacity is "ensuring a small capacity while causing congestion"; while long-term miners hope to increase transaction throughput as much as possible, so that the transaction volume can be greatly increased and the handling fees can be earned within a reasonable range.

BCH route - transaction volume is the fate of miners

On August 1, 2017, another version of Bitcoin, jointly promoted by another group of big block supporters and developers, was officially launched and named Bitcoin Cash (BCH). The BCH faction believes that Bitcoin should have a larger block limit to handle more transactions and improve transaction throughput, while maintaining a low average handling fee to meet user transaction needs to the greatest extent. Therefore, the initial BCH was set to an 8MB block limit and abandoned the segregated witness. It has been running steadily for 1 and a half years and has undergone two hard fork upgrades to gradually adjust the block limit and transaction performance. BCH has proven the effectiveness of solving transaction congestion by increasing the block limit.

The route of Bitcoin Cash (BCH) is actually the development route planned in the original white paper. The block limit will be gradually increased according to hardware and demand, so as to avoid congestion on the main chain as much as possible and maximize the user experience.

Large blocks can solve the problem of transaction congestion. Although the transaction fee is reduced, if the transaction volume increases, even if the transaction fee cannot reach the inflated fee when the average block capacity is 95%, the overall benefit of the increased transaction volume cannot be compared with the high-priced transaction fees of a few transactions. For example, BCH has reached 32MB, while BTC is still 1MB. BTC can theoretically process 7 transactions per second, while BCH can theoretically process up to 224 transactions per second. Assuming that BTC is fully loaded and BCH only has 50% of the block capacity, can only 7 high-priced transaction fees be compared with 112 parity transaction fees?

Miners are currently concerned about the hardware level. Increasing the block limit naturally puts higher requirements on the mining equipment of miners when processing super-large blocks, which is also the biggest reason why short-sighted miners oppose large blocks; at the same time, large blocks also increase the orphan block rate, wasting miners' time and resources, and putting higher requirements on the storage space of full nodes. According to the upgrade direction of BCH in the past year, when the current transaction volume has not exploded, developers are trying to stabilize the block limit. The current 32MB block limit has been stable for more than a year, and it seems that the development team has no plans to further increase the block limit in the short term. According to Moore's Law, when the block limit is increased again in the future, it will inevitably keep up with the development of hardware level. In response to the problem of orphan block rate, the BCH community has also proposed a solution to use small difficulty blocks (weak blocks) to create subchains (subchains) to connect and match complete difficulty blocks (strong blocks), effectively reducing the risk of orphan blocks.

As the block reward continues to halve, it will be reduced to 6.25 BTC per block in 2020. In the future, the main source of income for miners will still be transaction fees. As BCH faces a billion-level market in the future, the number of miners will grow explosively. It can be expected that the number of BCH miners and computing power will most likely continue to rise in the future.

BTC route - miners are just my main chain waiters

BTC has taken a completely different route. BTC has chosen to continue to maintain a 1MB block cap, and in the face of transaction needs, they believe that the second-layer network is the solution to the problem. Just recently, the lightning network, which they have high hopes for, has recently broken through the 700BTC transaction mark, and the initial promotion has made some progress. So is the lightning network friendly to miners?

The Lightning Network is a transaction method outside the main chain. The two parties to the transaction lock the coins in their own Lightning nodes. After opening the Lightning channel, the two parties can trade unlimited times in the channel, and only settle once on the main chain when the channel is closed. This has resulted in a huge transaction volume on the side chain, while the main chain has become a settlement layer with extremely low transaction volume. No matter how many transactions have been made, miners only have one chance to exit at the settlement, and the fee income is greatly reduced. The Lightning Network has broken the traditional pattern of the Bitcoin ecosystem. Miners are gradually marginalized in the BTC world. As block rewards gradually decrease, miners are less and less willing to mine in BTC. In the future, the number of BTC miners and computing power will most likely continue to decline.

Some people may think that the central nodes of the Lightning Network are the miners of the new era. Indeed, these central nodes are responsible for the task of transaction transfer and can also charge fees. However, the economic model of the Lightning Network has always been controversial. The intermediary nodes must be monopolistic in nature. Only one super node can win. In other words, the so-called new era miners are just individuals or companies, and cannot form an industry at all, because the Lightning Network is a winner-takes-all business behavior. The strong will become stronger and the weak will perish. This situation is the most efficient from an economic point of view.

Finally, BTC is facing a computing power crisis. BTC’s unfriendly attitude towards miners may drive out a large number of miners, which will eventually lead to a decrease in the computing power of the main chain. Under the POW mechanism, this is a problem that BTC needs to solve urgently. The expelled miners may eventually move to BCH in the future.