Critics blast Bitcoin Cash mining tax as a 'hostile takeover'

A proposed Bitcoin Cash development fund has sparked complaints that the network is at risk of a “hostile takeover” by powerful miners.

On Wednesday, Jiang Zhuoer, CEO of mining pool BTC.TOP penned a new proposal to fund BCH development. The "short-term" strategy involves directing 12.5% of the BCH coinbase reward into a central fund located somewhere in Hong-Kong. This "Infrastructure Funding Plan" purportedly comes in the wake of community inaction in funding BCH, as well as concerns of over-reliance on corporate financing.

But some members of the Bitcoin Cash community are angry at the proposal, seeing it as an attack on the network.

“The so-called proposed “infrastructure fund” is a hostile takeover of Bitcoin Cash development. This change is a trojan horse. It is NOT free,” wrote a pseudonymous Bitcoin Cash supporter, known as “Annapurna,” on a Reddit thread dedicated to fighting the fund.

In nearly 600 words, she raised a number of issues with the proposed idea. “This plan isn’t about supporting developers, this plan is about stealing from other future miners, wrapped in a fake cloak of concern. Whoever controls these development funds will be all powerful. This entity will be able to force changes they want and exclude those they don’t want from protocol development," she added.

"Centralized corruption and control"

The plan currently garners support from five of Bitcoin Cash's most prominent mining pools, including BTC.TOP; Antpool; BTC.com; ViaBTC; and Bitcoin.com, all of whom have a combined hashing power of 32.5%.

The key thing here is that blockchains can’t be changed as long as nobody controls more than 50% of its hash rate—computing power that keeps the network running and safe. But, if the owners of large mining pools come together, it’s possible they can reach this number and take control of the network. In fact, that’s the plan.

The post states, "The miners who want this change are planning a 51% attack to force it through. This attack will guarantee them control over ALL protocol development FOREVER. Whoever controls these funds controls the protocol."

So far, it is unclear who will command the Hong Kong fund—set to be the beneficiary of the Bitcoin Cash mining tax. This fund will receive 12.5% of all mining rewards, worth roughly $600,000 a day, or $216 million a year. So, it is important that, if the tax goes ahead, the right team chooses where the funds are allocated.

The Reddit thread even caught the attention of one of the proposal supporters, Roger Ver—who controls the Bitcoin.com mining pool—who himself highlighted the lack of a financing plan. He said "Figuring out who gets to spend the money, and on what" will be hard.

In defense of the fund 

There are several defenders of the infrastructure fund. Bitcoin Cash developer Amaury Sechet argued, in a blog post, that it won’t tax Bitcoin Cash—or indeed Bitcoin—miners. Instead, the developer reckons that because the funds come from the block reward only hashing power is affected 

"This inflation is usually used to secure the chain and now users will exchange some of the security for money for development," Sechet explained. But, if the tax is used to fund development, that could boost Bitcoin Cash in the long run—as long as the chain doesn’t become so weak that it breaks under pressure.