Bitcoin payments policy changes

[Steve Sokolowski]

The pool's bitcoin payout transactions are unconfirmed and this presents a significant problem. We need to wait until the transactions are dropped from the mempool, which might take days. The exchange withdrawals into our wallets have also been unconfirmed, so we can't even get any money into our wallets to start to fix the problem.

New payouts will cost $2500-4000 in fees, even if we issued them right now. That doesn't consider that fees will continue to rise in the next few days. We can't stay in business and operate on the bitcoin blockchain anymore, not only because of the fees, and because the money incoming to our wallets won't confirm, but because we aren't willing to risk the security implications of holding so many bitcoins. The bitcoin network has, for all useful purposes, "frozen up."

For now, we're simply going to stop bitcoin payouts until we can find a solution, so that more payments don't get stuck. No money has been lost. Chris will be evaluating some possible solutions. One possibility is to raise the network minimum for bitcoin to $200 and the free threshold to $5000 (remember, the fee you'll need to spend the bitcoins we send to you is $35, and it's been rising 25% per day). But this is not a good solution, because we already have debts of $0.5m to customers in bitcoins, and that would push our holdings into Nicehash-dangerous territory. We don't want to owe customers $2m in bitcoins that are balances too small to move.

We are also considering dropping bitcoin support altogether until we can mine SHA-256 payouts in our own blocks, or limiting bitcoin payments to Coinbase customers only, where they can be sent with no fee. Right now, the favored solution is the Coinbase solution, where customers will be required to sign up for a Coinbase account and then they will be credited with "paper bitcoins" they can send to external wallets if they choose to pay the fees.

Thanks for your understanding with this issue while we investigate solutions. We strongly recommend that all customers immediately stop earning bitcoins and select an alternate payout coin while we try to get these transactions confirmed and figure out a solution to this problem. A temporary answer if you want to end up with bitcoins is using the default payout option of litecoins and setting an exchange address, where you can then sell the litecoins for bitcoins on your own accord.


Further reading:

https://bitcoinfees.info/ - "historic average bitcoin transaction fees (dollars per transaction)"
https://blockchain.info/tx/fe094d2a28fc ... bf57663bb9 - a stuck transaction that paid $400 in fees, but the going fee rate is now 8 times that, so this payout will cost $3200 alone to execute

[investmentgroup]

Would a possibility be to give us the ability to convert to another coin for payment? Then if you could batch up these requests and move and exchange the BTC for LTC for example we could receive payment at a lower threshold. I suppose it's even possible there would be enough people in the prohashing ecosystem that wanted to swap that we may be able to swap between miners and not even need to move to an actual exchange to convert. Just a thought. May not make sense in reality.

[Steve Sokolowski]

Would a possibility be to give us the ability to convert to another coin for payment? Then if you could batch up these requests and move and exchange the BTC for LTC for example we could receive payment at a lower threshold. I suppose it's even possible there would be enough people in the prohashing ecosystem that wanted to swap that we may be able to swap between miners and not even need to move to an actual exchange to convert. Just a thought. May not make sense in reality.

That's completely possible for us, but we decided that it would be too legally risky to allow customers to request exchanges in support tickets. Once earned, money needs to remain in the currency that was selected for payment.

We almost have to treat the existing bitcoin debts as a sort of recovery or bankruptcy, even though there was no hacking. All balances under $50 right now have suddenly become dust, and that's if we were able to send them immediately, which we can't, because the exchange withdrawals are unconfirmed. Remember that the actual minimum payment amount is twice the transaction fee, because you need two fees for money to be received and then spent later.

I think the long-term solution is to end onchain payments of bitcoins and mandate that customers who want bitcoin payments sign up for Coinbase and link their accounts. After the money gets to their Coinbase accounts, customers can pay then (what will surely be at the time) $100 fees if they choose to get the funds offsite.

Can anyone sign up for a Coinbase account? Or, do you have to be in a specific jurisdiction? I'm not talking about where you can exchange bitcoins with Coinbase, just about signing up for an account.

[Aura89]

Is there a reason you publicly show everyone how much money is owed? I feel like that, itself is saying to potential hackers "Hey! here we are! This is how much bitcoins we have and the current value, as well as some other coins and their current value!"

[investmentgroup]

I would argue that I as a miner have not earned the coins until they are paid to my wallet. While they are sitting in prohashing they are just accumulating a invoiced balance. Similar to me working. Every day I go to work and accumulate some hours which entitles me to be paid. But until the check reaches my account I have not earned it from an accounting perspective. Basically they don't hit my accounting books as income until they are paid. They have simply been invoiced. You may agree or disagree, but thought I would offer a potentially different perspective. Through this lense I think it would be valid to allow for the exchange before payment. I would simply be choosing to invoice you for my work done in a different coin.

[Steve Sokolowski]

I would argue that I as a miner have not earned the coins until they are paid to my wallet. While they are sitting in prohashing they are just accumulating a invoiced balance. Similar to me working. Every day I go to work and accumulate some hours which entitles me to be paid. But until the check reaches my account I have not earned it from an accounting perspective. Basically they don't hit my accounting books as income until they are paid. They have simply been invoiced. You may agree or disagree, but thought I would offer a potentially different perspective. Through this lense I think it would be valid to allow for the exchange before payment. I would simply be choosing to invoice you for my work done in a different coin.

I can certainly ask the lawyer about this, but for now I'm sure you can understand we just need to be safe.

We're definitely going to get these existing transactions confirmed somehow, and then I think we will cease bitcoin payouts until we can figure out a better solution. The funny thing is that even if they do confirm, bitcoins are essentially worthless now because they are unspendable.

[bmhamlet]

If I switch to cash payout to coinbase will my current bitcoin balance be paid out in that manner? Thanks.

[investmentgroup]

I would argue that I as a miner have not earned the coins until they are paid to my wallet. While they are sitting in prohashing they are just accumulating a invoiced balance. Similar to me working. Every day I go to work and accumulate some hours which entitles me to be paid. But until the check reaches my account I have not earned it from an accounting perspective. Basically they don't hit my accounting books as income until they are paid. They have simply been invoiced. You may agree or disagree, but thought I would offer a potentially different perspective. Through this lense I think it would be valid to allow for the exchange before payment. I would simply be choosing to invoice you for my work done in a different coin.

I can certainly ask the lawyer about this, but for now I'm sure you can understand we just need to be safe.

We're definitely going to get these existing transactions confirmed somehow, and then I think we will cease bitcoin payouts until we can figure out a better solution. The funny thing is that even if they do confirm, bitcoins are essentially worthless now because they are unspendable.

Yes I understand completely. You need to be safe.

Thank you for being open to other perspectives. I feel quite comfortable accounting such that I have not been paid the coins until they're paid to a wallet I control. When they are in your wallet I have simply been allocated the coins in your ledger, like an open invoice. Until I receive them I have no income. It's just like me reporting hours to a client weekly. Or when I send an invoice at the end of the month. It doesn't hit my books as income until the check is in my hand or has been transferred into my account.

You and your legal team of course have to do whatever you believe is in your best interest.

Thanks again for listening and being open to alternative perspectives. I really appreciate how your trying to keep things honest.

[arnbed]

Hello Steve,

When will this transaction be confirmed? What do you do for ?
thank you very much

[HEKA_INNO]

I have switched, as requested, but am unsure of the fate of my remaining Bitcoin balance.