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Are Bitcoin SV Miners Only out there to Prop up the Chain?


As a fork of Bitcoin Cash, Bitcoin SV has been up against the wall. It faced competition from Bitcoin Cash to be the dominant fork, and lost out there. However, according to research from Binance, Bitcoin SV may still be in a struggle to survive.

The research on Bitcoin mining allocation shows that Bitcoin SV miners have not been working for economic reasons; their motivation is somewhere else as there is a big culture of mining at a loss. The research showed that the Bitcoin SV miners were incurring significant losses, and their profitability was both lower than Bitcoin, and Bitcoin Cash.

It raised questions as to what was motivating the Bitcoin SV miners, and what the greater implications are for the beleaguered Bitcoin fork.

According to the report:

“In summary, the Bitcoin SV reward-to-difficulty pattern implies that a significant portion of its hashpower might not have emanated from economically-driven actors until August 2019.”

According to Larry Cermak, the motives for the Bitcoin SV miners acting in an irrational and non-economically driven manner was for the protection of the blockchain. He said in a tweet:

“Great report by Binance Research. They found that if BSV miners acted rationally, they could have made ~$13M more – 17% of the total BSV mining revenue over the period. This perfectly illustrates the miners owned by CSW/Ayre who were mining to protect their s**t investment.”

As per the research, the explanation given by Binance was that the owning of many BSV coins would outweigh the unbalanced opportunity costs. The report concluded: 

““BSV miners were presumably not mining at a loss over the first six months of 2019, and their respective vested interests (i.e., owning a lot of BSV coins) probably out balanced opportunity costs. These vested interests would incentivize them to secure the BSV network to preserve a significant portion of their capital.”

Mining of Proof-of-work blockchains is often seen as a sign of health for the coins; economic incentive drives more miners to join the efforts, which in turn increases the difficulty and thus secures the network. 

However, when the economic motivation is not there, it must be concluded that the health of the network is at risk as the miners are under a different prerogative that is not financially governed, and thus could collapse at any stage.

Darryn Pollock
Darryn has been interested in the blockchain and cryptocurrency space since he heard about Bitcoin in 2015. He then decided to use his journalism degree to report on this fascinating fintech space in 2016, and has not looked back since.

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