Charlie Lee: Bitcoin Miner Voting is Kind of Silly, But Safest Option

On a recent episode of The Bitcoin Podcast, Litecoin creator and Coinbase Director of Engineering Charlie Lee spoke with co-hosts Corey Petty and Marcello Milteer about the activation of Segregated Witness (SegWit) on Litecoin. During the discussion, Lee shared his thoughts on the important role of miners in the activation process for protocol upgrades, which he referred to as “silly”, but he also clarified that it’s still the safest option available.

Activating SegWit on Litecoin

For Lee, getting Litecoin miners to agree on the activation of SegWit seemed like a simple enough task; however, it proved much more difficult than he initially thought.

“I thought the miners would all agree that, after being so boring for so many years, SegWit seems like an obvious choice to add to Litecoin to improve things, but that turned out to be a little bit harder to convince all the mines and pools to do it,” Lee told The Bitcoin Podcast.

According to Lee, it was difficult to sell SegWit to some members of the Litecoin ecosystem because it was originally sold as mainly a scaling solution in the Bitcoin community. From his view, miners did not realize all of the secondary benefits, such as the Lightning Network and Confidential Transactions, that are also enabled by SegWit.

“A lot of people didn’t realize what SegWit actually came with,” said Lee. “It’s a huge improvement for Bitcoin and Litecoin. Miners didn’t understand that.”

According to Lee, Bitcoin politics also caused issues for the activation of SegWit on Litecoin because some Litecoin mining pools also run Bitcoin mining pools. Lee claimed that some Litecoin miners or pools explicitly told him that they did not want to activate SegWit on Litecoin because it could possibly undermine their position against developers who contribute to Bitcoin Core.

“That was a political battle I didn’t expect,” said Lee.

Lee went on to say that he and other members of the Litecoin community had to prove to the Litecoin mining pools that SegWit was desired by both users and miners.

“Even though [the mining pools] may not care about making a little bit more money on Litecoin, the miners actually care and the users care, so it puts pressure on the pools to do what their miners and users want,” said Lee.

According to Lee, he was first able to convince a miner with around 10 percent of the network hashrate to start signaling for SegWit. Lee then also convinced F2Pool chief administrator Wang Chun to do the same. From his view, that is what got the ball rolling in terms of SegWit activation on Litecoin because the Litecoin price then became correlated with the prospects of SegWit activation on the network.

The Problems with Miner Signaling

Based on Lee’s experience, he believes the use of miner signaling for the activation of soft forks, as outlined in BIP 9, definitely has its drawbacks.

“In some sense, it’s just the pools that are in control,” said Lee. “From what I know, miners don’t really care too much. They obviously want their mining to be worth more, but most of them are blindly just buying equipment and mining bitcoins and not really that into the scaling issue or SegWit activation.

“For a lot of miners it’s more just like business; they may not even believe in cryptocurrency. They see an opportunity to make money; they put in some investment.”

While Lee clarified that this business-focused viewpoint does not apply to all miners, he added that it’s the point of view for “quite a few” of them. As a related note, Lee pointed out that miners were not immediately flocking to SegWit-supporting mining pools once it became obvious that the prospect of SegWit activation on Litecoin was having a serious effect on the price.

“This whole miner signaling or miner voting for protocol changes is kind of a silly idea to begin with because miners — they’re getting paid to mine right,” said Lee. “They’re getting paid to secure the network. That’s their job, and they get paid for that. They don’t know too much about the protocol, so asking them to make the decision whether or not to do SegWit versus [Bitcoin Unlimited] versus Flexible Transactions or what not — it seems silly that they’re making the decision.”

Lee added that some miners claimed to not want to make any protocol decisions at Scaling Bitcoin Hong Kong back in 2015, but he also stated, “These days, it seems like some the miners and pools are kind of — they now realize how powerful being able to make this decision is, and they’re taking advantage of that.”

A Better Method for Protocol Upgrades?

In terms of alternatives to BIP 9, Lee mainly discussed the idea of a
user-activated soft fork. When first discussing the idea of bringing SegWIt to Litecoin, Lee noted that it will definitely come to the alternative cryptocurrency if it’s something that everyone wants.

“I was never really in doubt that SegWit would activate on Litecoin,” said Lee. “It’s just a matter of when and how — whether it’s through miner-activated BIP 9 or it’s user activated, which could take longer.”

Lee went on to explain how a user-activated soft fork would work from his point of view.

“If users all want it, then exchanges would just run this code that would activate this feature after a year or a certain amount of time, and wallets would all run this code,” explained Lee. “After a year, it would just work because SegWit is a soft fork and it’s opt-in. If you don’t want to use SegWit transactions, you don’t have to, so it’s not really hurting anyone to have it in there.”

Lee also pointed out that there have been user-activated soft forks initiated on Bitcoin in the past by Bitcoin creator Satoshi Nakamoto and former Bitcoin Core lead maintainer Gavin Andresen. From this perspective, Lee says miner-activated soft forks are a relatively new idea.

In addition to a user-activated soft fork, Lee also pointed out that a user-activated hard fork could be used in a situation where miners were being especially malicious. Although not mentioned by Lee, these sorts of proposals oftentimes come with a change in the proof-of-work algorithm, which would destroy the investment made by mining companies in specialized mining hardware.

“If everyone wanted it and miners are really blocking it, then you hard fork away,” said Lee. “If user [activation] doesn’t work, then you do something drastic like a hard fork.”

With all this said, Lee concluded, “It’s nice that we were finally able to convince the miners and pools to signal and activate [SegWit] via miner activation because that’s like the safest way forward.”