Disputable Soft Fork for ZCash-type development fund Suggested by Bitcoin Cash Miners

Several BCH miners are developing a Bitcoin Cash soft fork which will divert some ot the block rewards to a new ZCash-type development fund.

According to the Medium announcement from January 22, CEO of BTC.TOP mining pool, Jiang Zhuoer, mentioned a team of several largest Bitcoin Cash mining pools which planned to soft fork the network to launch a ”short-term donation plan” that will decrease block rewards by 12.5% in order to fund network development.

“Investment in software and commons is crucial to secure a bright future for Bitcoin Cash,” the announcement reads, adding that carelessness may have a ”damaging” influence on the network. “We can avoid these problems by providing an adequate level of stable funding, allowing Bitcoin Cash to thrive and succeed.”

Signed by Jihan Wu of Antpool/BTC.com, Roger Ver from Bitcoin.com and ViaBTC’s Haipo Yang, Zhuoer’s announcemet states that present donation mechanism has ”significant problems”, as funds are donated voluntarily, which causes significant troubles for long-run projects, thus placing them under the ”undue influence” of corporations.

Zhuoer also maintains that only a few companies contribute to the community development, while all the rest represent ”a typical tragedy of the commons”.

Most of the miners mentioned in an announcement earlier voted for a ”development tax” during a CoinGeek BCH conference two years ago. A development report by crypto investment company Electric Capital indicates that over 30% of developers left Bitcoin Cash in a period from December 2018 to June 2019. This is the largest drop of any major blockchain network.

The announcement details, that as BCH uses the same hash algorithm as Bitcoin (SHA-256), most of the block reward costs will be taken from major BCH miners, who account for roughly 97% of the hash ecosystem. If we assume that Bitcoin Cash will stick to $300, Zhuoer calculates that the new mechanism can collect over $6 million in six months.

In a January 23 tweet, Emin Gün Sirer stated that ”From a financial perspective, there’s something clever going on”, adding that developer funding will slightly lower hash rate. ”This is sensible: empirically, more attacks have been due to underfunded devs than to malicious hashrate.”

But the proposition is not without disputable points. Zhuoer notes, that Bitcoin Cash blocks which do not embrace the soft fork ”will be orphaned”, meaning that they will be rejected by the five mining pools and risk not receiving any block reward.

Funds will be also sent to an unnamed ”Hong Kong corporation” which will coordinate payments to developers. It is unclear whether the corporation will pay third-party developers or do most part of the work itself, like the Electric Coin Company (ECC) on ZCash.

In an ask-me-anything (AMA) Reddit thread from January 23, Zhuoer stated that miners would ”’ensure the transparency and effective use of all funds” with the Hong Kong corporation. Antpool’s Wu added in the same thread that various details concerning the governance and prioritization of development projects were still ”under discussion”.

“There are many underspecified aspects to the proposal,” Sirer said. “Specifically, who will manage the collected funds and how will they be distributed?” He proceeded to say that the proposition ”was terrible PR and community management”, while the perspective of orphaning dissenting blocks may alienate most of the mining community.

It is also debatable how the five mining pools will make the community to accept their Bitcoin Cash soft fork. As of writing, the signators together account for less than 25% of BCH hash rate, far below the majority level necessary to propagate the soft fork themselves.