AntPool is burning 12% of Bitcoin Cash fees. Good or bad for BCH?
Antpool destroying a portion of its profits, and asking others to do the same, is raising questions.
Antpool is one of the world's larger cryptocurrency mining pools. A mining pool is when users get together to pool their computing power for mining, and share the rewards proportionally. Now in a seemingly bizarre move, Antpool has started burning 12% of the transaction fees it receives, by sending them to a "black hole" address, where money can go in but never come out.
"This is voluntary and we want to explain why this burning might be good for BCH as a whole," it explained in a blog post.
"While having active users spending BCH is very important for the ecosystem, having investors who hold BCH is also a fundamental requirement for maintaining a strong economy. Without these holders, BCH’s exchange value loses significant support. We believe that they too should profit from the growth of BCH by their continued stake in the Bitcoin Cash ecosystem. The transaction fees earned by miners are an important growth indicator of the BCH ecosystem, and if a portion of the fees are burnt, it is effectively miners sharing revenue with the entire BCH network... We call for other miners to join us in burning 12% of the transaction fees collected."
Essentially it aims to increase the value of the Bitcoin Cash already in existence by voluntarily reducing the coin's inflation rate. This is a widely used method, employed in different ways by different coins. Binance, for example, has committed to burning a portion of all BNB coin in existence on a regular schedule.
This move by Antpool can be seen in two different ways. Critics point out that Antpool is owned by Bitmain, which is probably one of the world's larger holders of Bitcoin Cash, and getting larger as it retains all transaction fees extracted by the miners using its pool. A marginal increase in coin price will almost certain enrich it more than most others, and a 12% reduction in BCH transaction fees earned by its pool is a relatively minor downside. If burning those fees can bump up Bitcoin Cash prices by just a bit, it will probably be worth it.
If Antpool really cared about Bitcoin Cash rather than enriching itself, critics say, it could burn some of the coins it already has rather than siphoning off a portion of the miner earnings.
For its part, Antpool argues that the move is in the best interests of the coin.
"The Bitcoin Cash blockchain is at the tipping point of becoming a widely used public blockchain... After the May 15th planned hard fork, more and more useful applications will be enabled on BCH... During the forthcoming wave of innovation, we believe that on-chain transaction volume will experience significant growth," it said.
"The crypto economy is not only about BCH though, nor is it only about money. It is also about protecting freedom of speech and freedom of association. BCH should embrace innovations and the free market, and be supportive and inviting of all kinds of applications being deployed on the BCH blockchain. The Bitcoin Cash community should embrace the entrepreneurial spirit and treat any fee paying transaction as a customer. Even if those transactions are non-BCH tokens, and even if those transactions are not about the transfer of money."
"The community benefits by welcoming the deployment of additional application tokens on the BCH blockchain. If we have an arrangement of sharing the growth in front of the tipping point of on-chain transaction explosion. We call for other miners to join us in burning 12% of the transaction fees collected."
According to Antpool, the idea is that the Bitcoin Cash ecosystem will start hosting a more diverse range of applications in the near future, beyond simply transferring coins. Transactions using these applications will also incur transaction fees. By burning a portion of the fees used for all transactions, Bitcoin Cash could get some deflation in its economy to help keep coin prices riding higher.
As one of the larger mining pool operators, which retains transaction fees, Antpool is more able to do this than most. However, it's an entirely voluntary scheme and it seems unlikely that everyone will willingly give up a portion of their profits.
Most cryptocurrencies that want this kind of feature will build it in from the start or deliberately work towards baking it into the coin programming down the line. But as a purely voluntary scheme, it might not last.
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VEN, XLM, BTC, NANO