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Charlie Lee has a better plan following BCH mining pools forcing 12.5% miner tax


Bitcoin Cash (BCH), the fourth-largest cryptocurrency by market capitalization, is facing a lot of backlash from the BCH community due to a proposed soft-fork that would redirect some of the block rewards towards a fund that’d be dedicated to developing the BCH infrastructure.

Unfair Taxation

According to a medium post on January 22, by Jiang Zhuoer, CEO of mining pool BTC.TOP, some of the largest bitcoin cash mining pools were preparing to soft fork the network to implement a “short-term donation plan” that would cut block rewards by 12.5 percent in order to fund network development.

The fund is a Hong Kong corporation, set up to legally accept and release funds and would be provided funding for six months to support Bitcoin Cash infrastructure. The plan is to implement this fork into Bitcoin Cash’s May 2020 protocol upgrade. The fund would receive approximately 112.5 BCH per day and about 20,588 BCH in the entire period. Based on the current prices of BCH, the total funded amount would stand out to roughly $7.1 million in total.

Some of the major Bitcoin Cash mining pools like Antpool,, ViaBTC, and, which represents 34.5% or a little more than a third of Bitcoin Cash’s total hash rate, are already in support of the proposed plan.

As per the post, “Funding of infrastructure may often go overlooked or be underprioritized. The long-term effects of neglect on infrastructure have the potential to be damaging.” Zhuoer believes that these situations can be avoided by “providing an adequate level of stable funding, allowing Bitcoin Cash to thrive and succeed.”

The proposed miner tax system is quite controversial as failing to pay would result in the entire block being abandoned. Zhouer further wrote:

“To ensure participation and include subsidization from the whole pool of SHA-256 mining, miners will orphan BCH blocks that do not follow the plan. This is needed to avoid a tragedy of the commons.”

The blog further stated that this proposal might be controversial, and some in the community may have reservations toward it; however, the plan would move forward regardless. The idea wasn’t too welcome in the BCH community and according to crypto commentator WhalePanda; this is “a centralized totalitarian regime.”

Charlie Lee’s plan

In response, Litecoin founder Charlie Lee proposed another system where the community would donate a 1% fee to fund the development of the Litecoin blockchain over the long term.

In a tweet on January 24, Lee stated:

“I think a better way to fund development is mining pools voluntarily donate a portion of the block reward.”

According to Lee, a 1% donation on a consistent basis would provide adequate funding for the Litecoin network over the long haul. He added:

“How about Litecoin pools donate 1% (0.125 LTC) of block rewards to the @LTCFoundation? If every miner/pool does this, it amounts to about $1.5MM donation per year!”

In a statement to Cointelegraph, Lee explained:

“At current LTC price, 1% of block rewards is about 7x Litecoin Foundation’s yearly expenses. Even if a small percent of miners are generous enough to donate, the foundation would be able to put it to good use by funding developers to work on Litecoin Core, Mimble Wimble, LiteWallet, LN wallet, hosting the yearly Litecoin Summit, and pushing for adoption of Litecoin by merchants and users.”

Lee also confirmed that these donations are voluntary.

In order to address concerns of a 51% attack, Dogecoin had merged its mining with Litecoin back in 2014. The joint Litecoin and Dogecoin mining also affect Lee’s proposal. Lee explained in another tweet:

Lee concluded saying miners would also be able to choose which Litecoin project the funds would be directed to. He said:

“Better yet, pools can let miners decide what organizations to send their 1% to. It can be Litecoin Foundation, @LitecoinDotCom, @theliteschool, or any other Litecoin project.”

Concerns about the development tax

The problem with the BCH proposal is the concern about centralization. The funds would be routed to a corporation, instead of a nonprofit foundation. The absence of any kind of voting procedure would mean that the owners of the company would have complete control over all Bitcoin Cash development.

Lee’s proposal is far more transparent and decentralized in nature. The LTC fund is aimed to be a donation whereas the BCH proposal threatens to orphan blocks that will not pay the new tax. Furthermore, Lee has just brought up the topic for discussion but BCH is already set to implement it.

The community, however, remains skeptical of the need for these funds to be donated to these organizations. Many believe that BCH miners might migrate to BTC which would be damaging for the BCH hashrate. It is yet to be seen how far the BCH and LTC community goes and the impact it has on both. 

Anna Larsen
Anna Larsen has been a Crypto enthusiast since 2016. Fascinated by the technology and its usecases she decided to pursue a career in content creation related to this space. The journey has been exciting ever since.

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