Miners Are Leaving Money on the Table to Mine Bitcoin Cash: This Could Explain Why
The Bitcoin Cash (Bcash or BCH) mining saga continues.
Last week, Bitcoin Magazine reported how — assuming all miners would act in their short-term self-interest — Bcash could potentially have its blockchain freeze in its tracks. Then, last weekend, the Bcash mining saga further developed, as some miners periodically triggered an emergency difficulty adjustment, leading to extreme swings in hash power, unreliable block times and increased inflation.
Now, the situation has taken yet another turn.
Bitcoin Cash is currently less profitable to mine than Bitcoin (BTC). And according (translation) to at least one mining pool operator, BTC.TOP’s Jiang Zhuo’er, this is intentional. Some miners, including Zhou’er, seem to be coordinating to keep the Bitcoin Cash difficulty where it is now, relative to Bitcoin and relative to the price of the two coins. In other words, Bcash miners are keeping Bcash a little less profitable to mine than Bitcoin, on purpose.
As we explained in our first article on this topic, miners that are driven by short-term financial incentives should all switch to the chain that is most profitable to mine (regardless of what other miners do). Yet, Bcash is still being mined despite being less profitable — and at a relatively regular pace. Blocks aren’t found too fast or too slow, inflation is not out of bounds, and the situation seems relatively stable.
In short, miners are collectively leaving money on the table to ensure that Bcash is usable.
The big question, therefore, is why.
The simple explanation would be that the Bcash miners expect the BCH exchange rate to increase significantly in the future and are therefore willing to “take one for the team” right now. (Keep in mind that even if miners believe in Bcash’s long-term potential, they would individually still be better off mining BTC and selling their proceeds for BCH — but someone needs to be mining Bcash for that to even be possible.)
Alternatively, miners could be invested in Bcash enough to want to keep it — and thus their investment — alive. Or maybe someone else is similarly invested is subsidizing the miners.
It could also be a matter of honor or pride.
Or perhaps there is a bigger picture.
The Bitmain Factor
Two of the biggest Bcash miners are ViaBTC and, indeed, BTC.TOP. But the vast majority of Bcash hash power is mining anonymously to two BCH addresses. This hash power must therefore belong to one or two mystery miners, or maybe one or two mystery pools.
Meanwhile, there is quite a bit of circumstantial evidence to suggest that Bitmain is involved with Bcash to some degree.
First and foremost, Bitcoin Cash was the realization of the “UAHF,” a plan first proposed by Bitmain. And while the mining hardware manufacturer has publicly distanced itself from the project to some extent since, it did not rule out the possibility of supporting Bcash later on. Indeed, two of Bitmain’s pools, Antpool and BTC.com, have mined BCH since.
Meanwhile, Amaury Séchet, lead developer of Bitcoin ABC (the first software implementation that implemented this UAHF) received funding from the Bitmain-sponsored Bitcoin Development Grant. Similarly, Juan Garavaglia, CEO of early Bitcoin Cash infrastructure development company Bitprim, is or was the authorized Bitmain distributor for the U.S. and Canada. And while any connection between BTC.TOP and Bitmain has so far been denied, ViaBTC did at least receive investment from the mining giant. And of course, Bitmain co-CEO Jihan Wu established himself as a big proponent of Bcash, both online and offline.
Furthermore, Bitmain might be one of the parties that could benefit the most from Bitcoin Cash, if the coin proves successful in the longer term. As opposed to Bitcoin, Bcash is still fully compatible with covert use of the patented AsicBoost technology that Bitmain admitted to having implemented in its chips, while Bitcoin ABC has no plans to counter this. And as Blockstream CSO Samson Mow argued, by producing their own coin, Bitmain can perhaps to some extent guarantee future hardware sales, even if Bitcoin were to ever, for example, adopt a proof-of-work algorithm change.
All this, and of course the fact that Bitmain is a world-leading producer of hash power, suggests that the company is in a good position to be responsible for one or both mystery miners. Or that someone associated with the company is.
While this theory is speculative and parts of it are officially denied, it would mean that Bitmain — or someone associated with Bitmain — is almost single handedly propping up Bcash. As a result, the coin is currently relatively functional. But barring more durable solutions, Bcash’s future might just depend on Bitmain’s willingness and ability to keep it that way.
Thanks to Johnathan Corgan for his feedback.