Development taxes seem to be coming into fashion, with more and more blockchain projects considering them. In the case of Bitcoin Cash, a controversial soft fork has been proposed that redistributes 12.5% of miner income to a fund for development of the cryptocurrency as a whole.
Now, Litecoin’s Charlie Lee says that miners in that cryptocurrency’s community should consider doing the same, but on a far lesser scale.
Voluntarily, Charlie Lee would like to see miners kick up 1% of their take. He would like to see the money go to the nonprofit Litecoin Foundation, which can fund a number of Litecoin-centric projects including wallets and commerce platforms.
The crypto founder said as much in a number of tweets this week.
1/ I think a better way to fund development is mining pools voluntarily donate a portion of the 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!
— Charlie Lee [LTC⚡] (@SatoshiLite) January 24, 2020
Litecoin is a bit different than Bitcoin Cash. 1% of mining revenue in Litecoin, where it is also inexpensive and fast to send transactions, will not be nearly as much actual money as 12.5% of Bitcoin Cash’s miner income. Even 12.5% wouldn’t be, all things considered.
If we take Charlie Lee’s math, then there’s about $1.5 million that can go to the foundation every year. Lee says this is much more than the Litecoin Foundation needs to fund its operations, and so the overflow would benefit other development teams.
Pushing For Adoption
At time of writing, the price of Litecoin was about $56. Overall, the cryptocurrency had seen a $3.2 billion volume across markets.
In a statement to another outlet, Lee explained that increasing the income of the Litecoin Foundation will cascade into support for ecosystem apps around Litecoin.
At current LTC price, 1% of block rewards is about 7x Litecoin Foundation’s yearly expenses. Even if a small percent of miners are generous enough to donate, the foundation would be able to put it to good use by funding developers to work on Litecoin Core, Mimble Wimble, LiteWallet, LN wallet, hosting the yearly Litecoin Summit, and pushing for adoption of Litecoin by merchants and users.
Increased usage of Litecoin, and therefore increased fees for miners, might mean a slightly higher dividend from the voluntary tax. As Lee says, excess funds might be used for the purpose of attracting new users, which could in turn create more activity on the network.
The approach to funding development stands in stark contrast to Bitcoin Cash, where some are proposing that blocks without the tax encoded be essentially blacklisted from the blockchain.
Most development in the crypto space happens at the behest of independent developers and companies with a stake in blockchain. These companies assign some of their own developers to contribute to the open source cryptocurrency projects, giving them more insight and control of a very decentralized process.