Introduction

Strategic Justificaiton

• The Miner’s Risk: Miners need liquid block rewards to cover operational costs. Even if a minority of network nodes reject a miner’s block the loss of economic acceptance of their block likely far outweighs the economic incentive to include blocks that are non-compliant to RDTS. Miners don’t need to support the proposed changes, they just need to fear that a committed minority will continue to reject their blocks, thereby reducing the liquidity of their block rewards.
• The Incentive to Defect: This creates a “Prisoner’s Dilemma.” whereby miners are incentivized to defect to the UASF chain early, not just to ensure their blocks are maximally accepted, but to capture rewards on a chain that initially have lower hash competition.
• The Incentive for late Signaling: Although we acknowledge that, at this stage, most economic nodes (major exchanges, hardware wallet backends, etc.) are not signaling for BIP-110, our understanding is that this is the result of the incentive for economic nodes (particularly miners) to signal late so that they can keep their ‘defection’ option open while continuing to harvest fees from inscriptions in the interim. Signaling early only invites social friction, whereas waiting until the activation deadline allows them to maximize short-term revenue before moving to the chain that commands the maximal market liquidity/acceptance.
• Economic Incentives Against BIP-110: LNL does not recognise that there is adequate incentive for miners and other economic nodes to resist the BIP-110 proposed changes at the expense of overall network stability.

Closing Statement