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New Bitcoin Cash (BCH) Coinbase Rule - Only 0.122% for Bullish Gains and Security

Hayden Otto - 4 November 2020

New Bitcoin Cash (BCH) Coinbase Rule November 4th 2020

November 15 will mark the beginning of a new golden age for Bitcoin Cash. Businesses, users and holders in the ecosystem all stand to benefit from the new coinbase rule which provides critical infrastructure funding. While fiat currencies like the US dollar are printed into oblivion, we can now respond by rapidly speeding up BCH development to position it to become Peer-To-Peer Electronic Cash for the world.

The coinbase is a transaction included in every Bitcoin block which has been used to incentivize miners to secure the Bitcoin network until it grows to a point where it is sustained by transaction fees. It is also the method through which new coins are minted. Currently the coinbase transaction is 6.25 units of BCH and the new coinbase rule will direct 8% of that toward Bitcoin Cash infrastructure development.

Specifically 4% is going to Bitcoin ABC, the developer team responsible for the creation of Bitcoin Cash and its reference implementation. ABC will use these funds to hire in-demand software engineers to speed up the completion of the Bitcoin Cash roadmap and make us competitive against tech giants like Google, Facebook and Microsoft. The remaining 4% will be managed by the Global Network Council, the new system for Bitcoin Cash governance that will invite key stakeholders to decide on infrastructure projects that should receive funding. Members of the Global Network Council include major miners, holders, and developers, who will gather in person once a year to vote. Ultimately this whole 8% is reinvested back into the Bitcoin Cash Network, funding efforts which stand to greatly increase the value of BCH and secure our competitive advantage over other coins.

But listen to this, because it gets even better. The burden on Bitcoin Cash miners won’t be an 8% reduction in profits, as some people with ulterior motives would have you believe. Initially when the new coinbase rule is activated, for some miners it will become unprofitable to continue mining BCH and so they will switch to other SHA-256 coins. Shortly after leaving, the BCH mining difficulty will adjust - making it more profitable to mine. The coin that these miners switch to will experience the opposite - a difficulty adjustment which makes it less profitable to mine.

Payback’s a bitch, BTC and BSV miners will be footing 98.6% of the bill for Bitcoin Cash infrastructure development, leaving only 1.4% for the BCH miners. Yes, that’s right, our competitors are funding this entire effort and they’re pissed because it’s beyond their control. If you’ve noticed the pushback and smear campaigns relating to the new coinbase rule, now you know why. Let me break down the maths that prove it: BTC, BCH and BSV account for pretty much all of the SHA-256 hashrate. At the time of filming BTC has 98% of the hashrate, BCH has 1.4% and BSV has 0.6%. Combining BTC and BSV hashrates result in 98.6% and if we multiply that by 8% for the coinbase rule it gives 7.888%. This is how much of the 8% coinbase rule BTC and BSV will pay, 98.6%. For BCH on the other hand, if we multiply the 1.4% hashrate by 8%, it gives 0.122%.

This means that with the implementation of the new coinbase rule, Bitcoin Cash miner’s profits will only be reduced by 0.122%.

In addition to coming at pretty much 0-cost for BCH miners, the new coinbase rule solves a number of problems that were previously experienced with donation-based funding mechanisms. Unlike donations, which are unreliable and always come with strings attached, the new coinbase rule ensures sustainable developer funding from an independent source - the coinbase. No longer will Bitcoin be subjected to the will of outside influences as we’ve repeatedly seen in the past. Instead, incentives of protocol developers will become aligned with the interests of the network itself.

Given that the developers will now be paid by a percentage of the coinbase, their level of compensation will be tied directly to the results of their work. If they produce valuable work and the price of BCH goes up, then they will be paid more. If they don’t produce valuable work and the price of BCH goes down, then they will be paid less. This is the equivalent of issuing equity in a company via shares or options, and through this developer accountability will be enforced. No more grifters making big promises to get paid but then failing to deliver. No more hobby developers who pay little attention to their BCH side project while their primary work is elsewhere.

Another major issue solved by the new coinbase rule is the free-rider problem. This is a market failure which occurs when those who benefit from public goods or services do not pay for them or under-pay. In this case we have Bitcoin Cash common infrastructure like the protocol software, which all the miners benefit from, but some do not contribute and thereby gain a competitive advantage over those who do. There are other areas where common infrastructure has been generously funded by entities like, even though it was not their responsibility. With the new coinbase rule this burden will be lifted from the shoulders of these donors and by freeing up more resources to improve their own businesses they will no longer suffer a competitive disadvantage. Protocol development will be supported by 4% of the coinbase and funding of other common infrastructure will be subjected to voting of the Global Network Council who manage the remaining 4%.

While Bitcoin Cash will soon enjoy governance via this council there is a drawback - it is not decentralized governance. This is a problem that is currently unsolved and should be implemented at a later date if a proper solution has been devised. The good news is that the current system requires proof of work in order to participate; proof of significant BCH holdings and proof that a mining entity has mined a significant amount of BCH blocks. I am of the opinion that the benefits greatly diminish any arguments against it. Bitcoin Cash is about to professionalize and with the reliable support of the independent coinbase funding, we will attract big businesses and top talent into our ecosystem.

Bitcoin Cash has to be serious about becoming money for the world, now. This year the anti-coinbase rule movement has cost BCH billions in market cap and wasted many years in combined developer time. There are people out there who want to hold Bitcoin Cash back, they do not want us to be successful in our mission and some of them certainly don’t want to pay for their competitors infrastructure costs. Fiat currencies are being rapidly debased and businesses are looking for alternatives. It is unfortunate that right now BTC is better positioned than BCH to take in new users from the collapse of fiat, despite it being totally unsuitable for a payments role. Bitcoin Cash has the best value proposition for the world after fiat, on November 15 the new coinbase rule will activate. Funding independence for Bitcoin Cash is coming. BCH will soon be considered a serious alternative to fiat and all it costs is 0.122%.

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