Bitcoin SV Miners Gave Up $13 Million in Revenue by Mining the Least Profitable Chain
Bitcoin SV, a fork of a Bitcoin fork, was conceived due to a rift in the Bitcoin Cash network regarding the implementation of the Avalanche consensus mechanism and transaction ordering. Binance Research has found that if loyal Bitcoin SV miners operated as rational businesses, they would’ve been able to secure nearly $13 million more in revenue in the year since the fork, December 18, 2019.
Game Theory is Nuanced
Study after study has shown us that rational miners will move to the most profitable chain to secure the most revenue they possibly can. Reality has begged to differ in this context. Economic researchers omitting key social factors and disregarding differing future outlooks in their analysis has led to wayward conclusions when observing the emotional minority.
Bitcoin SV was formed as a result of a group of people thinking the network has to take a certain direction, which diverged from the majority of the Bitcoin Cash community. Whatever you may think of the network, these individuals and businesses were drawn to Bitcoin SV due an “alluring vision” of a perfect society where Bitcoin needs to be a tool exploitable by sovereign entities – not one that protects individuals from these entities.
The end result is a lot of decisions by the minority are considered “irrational” by both, the traditional school of economic thought and pure game theory. However, social factors, or human behavior, sit at the heart of our decision-making process. Economic logic and game theory are far more nuanced than we give them credit for. Is Calvin Ayre mining Bitcoin SV because he thinks it will be priced higher than Bitcoin in the future, or because he sunk an astounding amount of capital into the network and its surrounding businesses? Pretty much both.
Bitcoin Cash Miners More Rational, Pitfalls of PoW
Binance’s study shows us that Bitcoin and Bitcoin Cash mining was far more profitable than that of Bitcoin SV. This was precisely why the economic logic that focuses on profitability was sound for the most part, but not absolute. Mining pools like CoinGeek and SVPool gave up profits in order to keep the network somewhat secure, accounting for nearly 33 percent of SV’s hash rate.
Since all three networks utilize SHA-256, one can say they are mutually exclusive in some way. A single mining device can either mine Bitcoin, Bitcoin Cash, or Bitcoin SV – not all three at once. Rational miners will choose Bitcoin for its higher profitability and ability to realize profits with much lower slippage. Emotional miners will choose one of Bitcoin Cash and Bitcoin SV depending on their loyalties. The fact that Bitcoin Cash and SV both still use SHA-256 means that these networks can be attacked by Bitcoin miners effortlessly if they ever wanted to.