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Why Litecoin’s Appeal for Miners’ Funding is Voluntary

Litecoin Pool now has a setting that lets miners voluntarily donate a percentage of their revenue to Litecoin Foundation, the Litecoin founder has said. Charlie Lee had at the end of January suggested that a better way to fund the network’s development would be through mining pools who voluntarily donate a portion of their block reward.

“How about Litecoin pools donate 1% (0.125 LTC) of block rewards to the @LTCFoundation? If every miner/pool does this, it amounts to about $1.5MM donation per year!” Lee had tweeted.

Now, with the option added, it would afford Litecoin miners who currently make 105%+ of block rewards with merged mining of Dogecoin and other Scrypt coins, according to Lee, to spare 1% as “a reasonably small amount to give back towards funding a public good.”

“Better yet, pools can let miners decide what organizations to send their 1% to. It can be Litecoin Foundation, LitecoinDotCom, theliteschool or any other Litecoin project,” Lee adds.

The Litecoin Foundation is a non-profit that seeks to advance the network’s blockchain use for the good of society. With part of its mission being to make donated funds transparent by presenting all funds and payments in public, the proposed miners’ donation is meant to help spread the burden a bit rather than the organization and the network’s ongoing development to depend on merchandise sales and other support presumably from its founder. How much a particular miner donates may not appear as the pool will only send the total amount donated to the foundation every couple of weeks.

Lee’s assertion that the foundation doesn’t pay him and he’s been putting more money into running it as well as supporting the privacy and fungibility MimbleWimble technology coming to the network may explain the need for a funding alternative.

Though the donation is connected to block reward issuance via the pools which most miners use on a regular basis, the voluntary clause to it serves key purposes – some maintain the donation appeal may not work for miners for their already low profits. It allows miners to easily opt to either send their donation to the organization they consider to be more effective or stop the donation altogether. This is meant to give miners a choice on who they support to keep the decentralization dream of Litecoin alive. The decision could be individual  and not jointly with other players on the network and such be without any consequences.

Considering that Litecoin’s value will drop in market share without any meaningful development, not making the contribution voluntary could hurt the network as miners who give up part of their revenue will have their profit reduced while their operating costs remains the same or even rise for those using older mining equipment. When such a rise becomes too expensive for them to run their equipment, they may resort to shutting down their miners thus exposing the network to security risks.

Also in line with securing the network are pools that are either not winning as much block rewards to afford making a donation on free will or just do not want to contribute for reasons best known to them. Not making the donation option voluntary could see some of those in this category leave the network which will not augur well for Litecoin.

Litecoin has always been dubbed the testnet for Bitcoin where new features, risks, community and market views are sought to answer crucial questions related to security, infrastructure, trends etc. Hence, its network’s well-being and development are paramount, in a way, to the wider crypto community. Proponents of the proposed miner donation approach believe it is an investment in the sustainability of the project which could add value in the long term and pave a better development path to promote adoption.


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