Bitcoin Cash Miner Tax Suggested by Litecoin’s Charlie Lee

Developer funding is an essential facet of the growth of blockchain projects. The primary way money these developers make money is through a corporate sponsorship. CEO of the BTC.TOP Bitcoin mining pool, Jiang Zhuoer, indicated a bias towards having a sponsor as well, though Zhuoer’s post has been edited since it was first released. The primary concern with this suggestion from Zhuoer; Jihan Wu of Antpool and BTC.com; Haipo Yang of ViaBTC, and Roger Ver of Bitcoin.com, is the condition that sees miners who do not obey this order getting their blocks orphaned. The greater implications are that this creates a centralized force that claims this tax – and the tax revenue goes to corporate before distribution. Lee, one of the primary criticizers of this move from the Bitcoin Cash miners, has tweeted that he appreciates the need for funding developers and that a taxation model may not be the worst idea. However, his suggestion is less coercive.

Bitcoin Cash Voluntary Donation

In the proposal outlined by Zhuoer, it is one paragraph that sticks out like a sore thumb, raising the ire of cryptocurrency enthusiasts and miners alike: orphaning blocks. Lee’s suggestion is to allow for a tax, but to make it a lot smaller, and to make it voluntary.

1/ I think a better way to fund development is mining pools voluntarily donate a portion of the block reward. How about Litecoin pools donate 1% (0.125 LTC) of block rewards to the @LTCFoundation? If every miner/pool does this, it amounts to about $1.5MM donation per year!

— Charlie Lee [LTC⚡] (@SatoshiLite) January 24, 2020

Lee reasons that if miners in the Litecoin pools were to donate 1 percent (0.125 LTC or $6.60) of block rewards to the Litecoin Foundation, it would add up to a substantial $1.5 million yearly boost for the developers of the asset. More so, by making the amount small, and the donation voluntary, it would not be a big loss to incur, especially when considering the merged mining of other Scrypt coins.

2/ Currently with merged mining of Dogecoin and other Scrypt coins, miners make 105%+ of block rewards. So 1% is a reasonably small amount to give back towards funding a public good.

— Charlie Lee [LTC⚡] (@SatoshiLite) January 24, 2020

Lee also adds that, unlike the BCH model, which says the funds will be collected by a Hong Kong corporation to legally disperse funds, the LTC tax should allow miners to decide where the funds go – such as to Litecoin.com, the Lite school, or other related projects.

3/ Better yet, pools can let miners decide what organizations to send their 1% to. It can be Litecoin Foundation, @LitecoinDotCom, @theliteschool, or any other Litecoin project.

What do you guys think?

— Charlie Lee [LTC⚡] (@SatoshiLite) January 24, 2020

Counterpoints

While this suggestion from Lee seems far less damaging to the project in terms of centralizing and coercing miners to fall in line, or fall out, there are still some who feel miners taking on more costs is dangerous. Miners often operate on the finest of margins of profitability so even a small donation could skew that, especially for miners who operate on more of a hobby basis as opposed to major mining farms. https://twitter.com/PrzMachoCamacho/status/1220832465213886466?s=20