Reports Criticize Bitcoin SV Miners and the Chain’s Upcoming Fork
December 20, 2019
In the last two days there have been two critical posts published against the Bitcoin Satoshi’s Vision network (BSV). On December 17, Binance Research published an allocation mining report that analyzed the mining activities of BTC, BCH, and BSV and the research detailed that BSV miners are mining irrationally to protect their investment. The following day, the firm Bitgo published a report that disclosed it will be depreciating BSV because of the upcoming hard fork that aims to remove Pay-to-Script-Hash (P2SH) outputs.
The Bitcoin Satoshi’s Vision network (BSV) is being criticized for a couple of reasons this week and the topics are trending within the cryptosphere’s chatter. For instance, on Tuesday the research team for the crypto exchange Binance published a report that disclosed the mining activities of BTC, BCH, and BSV in 2019. The report highlighted that cryptocurrency mining has become far more competitive and revealed that BSV miners are mining at an opportunity cost. Usually, an opportunity cost means that a cost is incurred for irrational reasons, rather than enjoying the profits associated with the best alternative choice. When comparing the BTC, BCH, and BSV networks, Binance researchers underlined that “cryptocurrency mining for BCH was often more economically rational.” However, when it comes to BSV mining in 2019 it “involved a significant opportunity cost for most of 2019, which is estimated at more than 15% of its total mining revenue for its entire history, since the November 2018’s fork.”
All three blockchains use the same hashing function and throughout the year, BSV miners suffered the worst according to the Binance report. “In less than a year, an estimated $12-13 million could have potentially been collected by Bitcoin SV miners, if they were acting rationally in their mining resource allocation,” the study notes. “In comparison, BSV total mining rewards (assuming miners selling BSV coins at the end of each business day) were around $75 million over the same period. As a result, this potential opportunity cost represents around 16-17% of the total BSV mining revenue over the period.”
Following the report from Binance Research, another post was published the next day by the Bitgo developer known as Murch in regard to the upcoming BSV chain fork. According to the post, Bitgo is urging BSV users to withdraw BSV from the company’s platform because Pay-to-Script-Hash (P2SH) outputs will soon be invalidated. This is because, on February 4, 2020, BSV is planning to upgrade with the “Genesis Hard Fork,” which plans to remove P2SH. “Since Bitgo’s BSV wallets use P2SH-based multi-signature addresses, the protocol change will render Bitgo BSV wallets unable to receive funds,” Bitgo’s notice detailed. Murch writes that starting February 4, 2020:
Funds already held in P2SH unspent will remain spendable; you will be able to continue to send funds out of your wallet
You will NOT be able to receive funds for your Bitgo BSV wallet. Transactions attempting to send funds to Bitgo wallets will be invalid, including transactions from a Bitgo wallet attempting to return change back to the same wallet
The Bitgo developer insisted that clients holding BSV with the company’s wallet need to either “convert BSV holdings to [BTC]” or “move BSV funds to an external wallet.” “If you continue holding BSV in your Bitgo wallet after February 4th, you will only be able to sweep the wallet and most functionality will be disabled,” the Bitgo representative concluded. After the Bitgo post published many people discussed the subject on social media and a few BSV supporters criticized Bitgo’s actions. Other members of the crypto community disagreed with BSV proponents who complained about the de-listing and believed that Bitgo made a logical decision.
“BSV cultists act like it’s totally out of the blue that them sunsetting P2SH was a bad idea,” said Cointext CTO Vin Armani on Twitter. “Like somehow Bitgo is at fault.” Despite the widespread P2SH support, The Bitcoin Association, an organization that promotes BSV, published a blog post that said the entity was “disappointed that Bitgo will discontinue their support of Bitcoin SV.” The company added:
It is unfortunate that the various Bitcoin ecosystems have grown accustomed to using the obscure P2SH method of doing multi-sig transactions.
What do you think about Binance Research explaining that BSV miners mine at a loss? What do you think about Bitgo depreciating BSV support after February 4, 2020? Let us know what you think about this subject in the comments section below.
Image credits: Shutterstock, Twitter, and Binance Research.