How BCH’s Developer Fund Proposal Could Affect SHA-256 Mining

Summary

This analysis examines a 2020 proposal by Bitcoin Cash mining pools to direct 12.5% of block rewards to a developer fund and orphan blocks that do not comply. It explains how majority hashpower can enforce such a rule, then models the impact across Bitcoin Cash, Bitcoin, and Bitcoin SV because they share SHA-256 mining. Since miners can shift hashpower among chains, the author argues that reducing BCH rewards could redirect some miners to other SHA-256 networks, raise their difficulty, and spread the economic cost across miners rather than limiting it to BCH operators.

The article also considers the governance question of miners redirecting funds users intended for network security. It outlines possible user responses, including selling, a user-activated fork, or changing proof of work, and weighs whether other miners would resist the proposal. Its conclusions depend on miners’ ability to move freely between chains and on their expectations for the fund’s effect on the total reward pool; the article presents an economic argument, not measured outcomes after implementation.

Key ideas

• A majority of hashpower can exclude minority miners’ blocks by refusing to build on them.
• Because BCH, BTC, and BSV share SHA-256 mining, miners can reallocate hashpower among the chains.
• The author argues that a BCH reward reduction could raise mining difficulty on other SHA-256 chains.
• The proposal raises a governance question about miners directing rewards away from network security.
• Users could oppose the change through market actions, a user-activated fork, or a proof-of-work change.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.