Bitcoin Jesus Caves as Fight Over Fourth-Biggest Coin Heats Up
A proposal that threatened to tear apart Bitcoin Cash, the world’s fourth-largest cryptocurrency, appears to be on the rocks.
(Bloomberg) -- A proposal that threatened to tear apart Bitcoin Cash, the world’s fourth-largest cryptocurrency, appears to be on the rocks.
On Jan. 22, a group of key Bitcoin Cash supporters proposed changing the cryptocurrency’s computer code to temporarily direct 12.5% of all newly issued coins to fund technology development -- an idea that irked many purists who prefer the typical decentralized governance of most cryptocurrencies.
The proposal had a high chance of passing, though, as companies advocating for the change controlled a third of computing power used to support the network of the Bitcoin offshoot in the past week, according to data tracker Coin Dance. Many miffed investors and miners, whose computers support Bitcoin Cash, threatened to leave were the proposal implemented on May 15.
Fast-forward to today, and one of the proposal’s key supporters, and the public face of Bitcoin Cash, Roger Ver, has had a change of heart. In a post, Ver -- also known as Bitcoin Jesus for proselyting about the world’s largest cryptocurrency in its early days -- announced that his company Bitcoin.com “will not go through with supporting any plan unless there is more agreement in the ecosystem.” The mining operation said it will work to come up with an alternative plan “which preserves the fundamental economics of Bitcoin Cash.”
Bitcoin Cash still likely has to do something to prop up its developer ecosystem. The average number of developers working each month on Bitcoin Cash-related projects declined 32% in the first half of 2019 from the previous six months, according to Electric Capital. The project lost the most developers of all other top cryptocurrencies.
Networks with deep pockets and corporate supporters have a marked advantage and staying power in the wake of the bursting of the crypto bubble. Rival coin EOS is supported by startup Block.one, which raised $4 billion by selling tokens. Tron blockchain is largely developed by entrepreneur Justin Sun. A company called nChain and entrepreneur Calvin Ayre support Bitcoin SV.
“The dev tax is wounded, but not dead,” said developer Peter Rizun, who is against the proposal. He pointed out that many key miners support the proposal, and could still implement it on May 15. The supporters say the funds, estimated to reach about $6 million, will help protect the projects from “well-funded saboteurs“ and help the coin “thrive and succeed.” Bitcoin Cash’s price has rallied 6% since the proposal was introduced, pushing it’s market value to about $6.6 billion.
Ver’s view changed after a group of anonymous Bitcoin Cash miners posted on Jan. 27 that they will create their own network if the fee goes into effect. The change would come at a bad time for the mining industry: In April, Bitcoin Cash is supposed to go through so-called halving, when mining rewards drop in half. The developer fund would cut into them further.
“After we lose half our hash rate as we half our block reward several weeks ahead of Bitcoin, and lose another 12.5% hash rate on top of this, we worry about the viability of the currency,“ according to the Jan. 27 letter. Today, 10 mining companies or pools account for nearly 60% of the network’s hashpower, according to Coin Dance.
To contact the reporter on this story: Olga Kharif in Portland at okharif@bloomberg.net
To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Dave Liedtka, Brendan Walsh
©2020 Bloomberg L.P.