Bitcoin Cash and Litecoin propose miner donations for future development

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  • Founder of Litecoin, Charlie Lee proposes to use 1% mining rewards as a donation for the development of the cryptocurrency.
  • Bitcoin Cash (BCH) will introduce a 12.5% tax on mining rewards. Blocks of non-compliant entities will not be propagated in the blockchain.

Litecoin (LTC) and Bitcoin Cash (BCH), have made different proposals to finance their future development. The proposals are aimed at mining rewards. Although they have different approaches, both have been just as controversial in the cryptocommunity.

Charlie Lee proposes 1% donation to fund Litecoin

Litecoin’s proposal was made by its founder, Charlie Lee, and consists of receiving voluntary donations of 1% of the mining rewards. After last year’s halving, Litecoin’s mining reward is 12.5 LTC, so a 1% donation will equal 0.125 LTC. As announced by Lee, miners will also be able to donate mining rewards for Dogecoin and other cryptocurrencies.

2019 was a difficult year for Litecoin. The hash rate of the blockchain was at low levels and Litecoin Foundation has had trouble getting funds for the project. Especially because of Litecoin’s negative performance during the last months of 2019.

Although the proposal was to make voluntary donations, the community was not receptive. Many users expressed their disagreement and considered any attempt by the Litecoin Foundation to take mining rewards to be negative. Charlie Lee emphasized that donations represent a very small fraction of the rewards and stated:

If every miner/pool does this, it amounts to about $1.5MM donation per year! (…) Currently with merged mining of Dogecoin and other Scrypt coins, miners make 105%+ of block rewards. So 1% is a reasonably small amount to give back towards funding a public good.

Bitcoin Cash (BCH) to impose 12.5% tax on all miners

On the other hand, Bitcoin Cash has a more invasive approach. Starting in May, miners will have to pay a 12.5% tax on rewards. The money collected from this tax will go to an entity located in China and will be used for the development of Bitcoin Cash. Roger Ver, one of the drivers of Bitcoin Cash, has defended the measure arguing that it is a more favorable alternative than private investments.

After its activation in May 2020, the tax will be applied for 6 months with an estimated gain of $13 million. The tax will take effect near the halving of Bitcoin Cash and is also supported by major mining pools such as Antpool and the mining pool

The community has also been unreceptive to this proposal, especially since miners who do not contribute will not be able to validate blocks and will be virtually expelled from the blockchain. In addition, Bitcoin Cash users have criticized the measure for not being consulted and for the centralizing features it will bring to the BCH ecosystem.

Roger Ver said through his Twitter account that the hard part will not be raising the money, but finding an effective method to control and spend it.

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