The true reason the Jihan mining monopoly is blocking SegWit

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Let's put ourselves into the mind of Jihan to get a clearer picture of what is REALLY driving this player's actions.

Jihan, the owner of Antpool, has ~17{88c91daedd271a990a10650c05d769cae2765e0603edf30ca95f18704e5748e8} of Bitcoin hash power under his control: https://blockchain.info/pools through his pool alone — this coupled with the fact that his company BitMain is responsible for shipping the majority of Bitcoin mining hardware on the market provides him with a large network of influence over the greater mining community as a whole.

By using his business connections he has the ability to extort large mining companies who have bought equipment off him outright (opposed to renting or payment plans) by refusing them further equipment sales or maintenance if they do not follow his lead, effectively neutering there business model and potential growth.

There are a few revenue streams here that Jihan has access to, revenue streams that his influence has proportional control over:

  • BitMain rents mining equipment to large mining companies. The more profit these mining companies earn, the greater the profits for Jihan.
  • The block rewards earned through his own mining equipment in his own data centers.
  • The fees earned through mined blocks through his Bitcoin pool.

With all of that in mind, it becomes clear to see why Jihan has a special interest in preventing any scaling measures from taking place any time soon. The Bitcoin network fees are now at a point where they're highly lucrative due to the fee market that has developed because the blocks are full. Every one of his revenue streams has a lot of profit to gain by increasing fees, especially his control over his mining pool.

  1. Increased fees translates to increased earnings for the companies he rents hardware to, this means in-the-pocket revenue for Jihan. It also means that these companies have a lower incentive to support a blocksize increase for the same reason Jihan has a low incentive to support a blocksize increase. It's easy to see why they are not too resistant to his influence.

  2. Antpool takes ALL transaction fees for themselves for the blocks the pool solves. This is a MASSIVE source of revenue.

Luke-Jr claims that it's likely Jihan controls over 50{88c91daedd271a990a10650c05d769cae2765e0603edf30ca95f18704e5748e8} of the Bitcoin network hash power — however I think that might be a slight exaggeration. Controls through indirect means perhaps? In either case, if we estimate that his hash power is around 30{88c91daedd271a990a10650c05d769cae2765e0603edf30ca95f18704e5748e8} of the network (we know he controls at least 17{88c91daedd271a990a10650c05d769cae2765e0603edf30ca95f18704e5748e8} for certain), then let's crunch the numbers.

Taking a look at the transaction fees: https://blockchain.info/charts/transaction-fees-usd — if we take the average USD earnings of transaction fees for miners for the last month (30 days), it comes to an average of ~$270,000 USD per day.

With 30{88c91daedd271a990a10650c05d769cae2765e0603edf30ca95f18704e5748e8} of hashing power, 30{88c91daedd271a990a10650c05d769cae2765e0603edf30ca95f18704e5748e8} of $270,000 = $81,000 USD a day Jihan is earning from fees alone. That's 2.5 MILLION USD a month.

Even if we play the numbers safe and make zero assumptions about his true network influence, at 17{88c91daedd271a990a10650c05d769cae2765e0603edf30ca95f18704e5748e8} of hash power he's making a generous $45,900 USD a day, and over 1.4 million USD a month.

Using the 50{88c91daedd271a990a10650c05d769cae2765e0603edf30ca95f18704e5748e8} estimate, it's around 4.2 million USD a month.

Keep in mind, this is ONLY revenue from transaction fees, and is not including revenue from other sources like block rewards.

So with these figures in mind it becomes quite simple to see why Jihan has an enormous incentive to delay a bigger blocksize as long as humanly possible, provided that the profits he is making from fees offsets the losses he is facing from a diminishing market sentiment, and so far that has been the overwhelming case. Also keep in mind that his influence over market sentiment provides him with insider information to leverage short the market at opportune times, further increasing his revenue and offsetting any potential losses.

In conclusion I think it's safe to say that his BU support is a massive bluff and a delay tactic. An excuse not to activate SegWit, and a way to carefully balance the scales so that both sides are vying for control for as long as possible. Whilst we have conflict and division in this community and consensus is not being reached, he is sitting there reaping the rewards. Millions of dollars in rewards for every month that passes, to be clear. Any greedy rational actor would be doing the same. Who knows how Ver ties into this, perhaps Ver is taking bribes from Jihan to be his media sockpuppet. The behaviour of the BU developers certainly speaks to them playing a fine game of balance, I suspect they don't ACTUALLY want to gain too much support because they are not REALLY in a position to take over the reigns, and if it was to happen then Jihan is well aware that his investment in Bitcoin would be severely damaged as a result.


TL;DR: Jihan earns millions of dollars in transaction fees a month by blocking SegWit. The longer the community is divided, the longer he is earning these fees. His BU support is more than likely a bluff and a delay tactic.

submitted by /u/thesilentwitness
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1 BTC = $36588.12 USD  (via Coinbase)
1 ETH = $2609.35 USD  (via Coinbase)
1 LTC = $115.50 USD  (via Coinbase)
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