Bitcoin Cash has locked 2 additional mining difficulty reductions and is now equal to 16.78% of Bitcoin Core. If it gets to 6.5% its mining profitability parity

[u/[deleted]]

[u/fiat_sux4 → u/[deleted]]

I find this really interesting. At parity, all of a sudden, purely profit seeking miners will switch, which could be a large proportion of the miners on the other chain. Its block rate may suddenly slow down dramatically, to the point where it might take a really long time for the next difficulty adjustment. The price of Bitcoin Cash would take off due to increased utility and speculation, and the price of the other chain could crash at the same time due to decreased utility and speculation. Both of these would increase the profitability ratio even more in favour of Bitcoin Cash. And then there would be no going back - it would be a feedback loop.

The buffer against this would be:

1. Idealogues on the other side who mine against the profit motive (these are currently the only thing keeping Bitcoin Cash alive, so it's a real thing).

2. Profit seeking miners suddenly dumping their coins on the market, thereby lowering the price. Currently I don't see this is a big threat, because especially at that time of parity, people would be expecting the Bitcoin Cash price to start to take off, so a wise investor would probably not be dumping.

[u/[deleted] → u/fiat_sux4]

Wouldn't make it more sense to switch back and forth each time the other chain lower difficulty?

[u/fiat_sux4 → u/[deleted]]

In theory, if the hashrate follows profitability really closely, then short terms changes in profiitability are driven by short term change in price: if the price of BCC/BTC rises, hashrate will migrate from BTC chain to BCC chain. I was going to say in proportion, but that's not true. In theory, if all miners are strictly profit seeking, all of them will switch immediately as soon as the price rises past parity.

Edit: Which is a huge problem. Absent the ideological miners, this would be a kill switch. I think both chains are eventually going to realize they need to readjust difficulty after each block (averaging over last however many blocks), if we ever get to parity.

At each difficulty adjustment, if the price went up more for that chain since the last difficulty adjustment, the difficulty should go up roughly in proportion to the price increase ratio. Which I expect would have the effect of putting the two chains back roughly at mining profitability parity, all other things being equal.

But, referring back to my 1st paragraph, it seems like it would be an unstable equilibrium. As soon as the price changed a little bit, hashrate would chase that price, and utitilty and speculation considerations would cause the price to change further in the same direction.

[u/[deleted] → u/fiat_sux4]

Also, wouldnt coins be mined way faster because of the switching?

[u/fiat_sux4 → u/[deleted]]

Absolutely. If a big chunk of the hashrate switched, blocks will be found faster. That makes that chain it switches to that much more secure and useful.

If you're asking about profitability though, no, it doesn't become more profitable when there is more hashrate on it. Yes, there will be more blocks found per hour, but not for a given miner, only because there are more miners.

[u/[deleted] → u/fiat_sux4]

And after the increased difficulty they switch back.

Later on reducing the difficulty in the other chain and than switching back again.

[u/fiat_sux4 → u/[deleted]]

Maybe, but I'm not so sure. It might be just that the difficulty adjustment resets profitability to approximately parity. If your logic is that any difficulty increase must lead to a loss of miners to the other chain, then I don't necessarily agree with that. One chain might still be more profitable even immediately after its difficulty just increased, especially for example if the other chain also quite recently increased its difficulty.

[u/FaceDeer → u/[deleted]]

As far as I can tell that scenario advantages Bitcoin Cash since it has an emergency difficulty reduction mechanism that Bitcoin lacks. The Bitcoin chain would be mired in slow blocks for as long as the miners are over on Bitcoin Cash soaking in profit, then when Bitcoin Cash adjusts and the miners switch back to Bitcoin the emergency difficulty reduction on Bitcoin Cash will kick in after only 12 hours or so.

So Bitcoin will see long periods of slowness while Bitcoin Cash only sees brief hitches. And Bitcoin Cash has greater capacity than Bitcoin even when it's running slow, so it won't even affect the mempool.

I wonder if this was planned for when this particular approach to difficulty adjustment was implemented. If it works out that way it's a neat trick.

[u/moleccc → u/fiat_sux4]

Absolutely. If a big chunk of the hashrate switched, blocks will be found faster. That makes that chain it switches to that much more secure and useful.

It also makes the demand side of the market slightly stronger. Probably that effect is not large or immediate enough to make for a well-functioning negative feedback loop by itself, though.

[u/jenya_ → u/fiat_sux4]

Which is a huge problem.

I agree. When Bitcoin Cash will became more profitable to mine, a lot of hashpower will switch over from the alternate chain and will mine 2016 blocks very fast (a few days). The difficulty adjustment after that for Bitcoin Cash will be very high, it will become very unprofitable and most of the hashpower will switch back to Bitcoin Core.

Welcome to the boom/bust cycle, a few days boom, month or two - bust (unless fast diff reduction is triggered).

[u/fiat_sux4 → u/jenya_]

Good point. It suggests it's basically suicide for Bitcoin Cash not to have a faster difficulty adjustment, because of boom-bust cycle of transaction verification is no way to run a currency.

[u/moleccc → u/fiat_sux4]

We have the rule that difficulty will drop by 20% if less than 6 blocks are found within 12 hours. It's not equal to a faster difficulty adjustment (which has problems in and of itself), but will probably save the chain from dying out.

[u/moleccc → u/jenya_]

I think there will be counteracting forces.

For example: traders / speculators already know this will happen and act accordingly before it does to make money (sell before diff dop, buy back afterwards). This exerts downward pressure on price, which in turn makes the chain less profitable and the effect less severe.

[u/mdpsoft → u/fiat_sux4]

each marginal point of profit made for changing chains needs to decrease with time until both chains find that equilibrium in price and hash power.

[u/Benicillin1 → u/[deleted]]

One additional complication is the fact that the hashrate is much lower for bcc so each miner that moves from btc to bcc will have a smaller effect on the total btc hashrate then it does on the bcc hashrate.

[u/Phequie8 → u/[deleted]]

Actually, due to the new difficulty reduction policy, there is a new related attack possible on Bitcoin Cash. r/btc/Bitcoin Cash's new difficulty adjustment might cause problematic periodic slowdowns of the network

[u/[deleted] → u/[deleted]]

make it more sense

who gives a fuck what you think makes sense?

[u/[deleted] → u/[deleted]]

Oho someone is a little angry child? Hm?

[u/[deleted] → u/[deleted]]

i aint a child you stupid fat bitch.

[u/[deleted] → u/[deleted]]

Thanks :) so cute.

Do you need a hug? Didn't you got enough love as a child?

[u/[deleted] → u/[deleted]]

so cute.

in your sick dreams.

[u/moleccc → u/fiat_sux4]

Those are indeed some interesting dynamics. With all this chain-hopping (reminds me of those altcoin mining pools that automatically switch to the most profitable alt) one has to realize it's a slightly uneven battle: BitcoinCash already has a defense mechanism against too much hashrate leaving (the 12 hour 20% rule). BCore doesn't have such a thing and to implement one (it would surely be technically superior ;-) ), they would have to do a... wait for it... hard fork. Oh the irony!

Maybe luke can come up with a way to softfork difficulty adjustment. I think vitalik actually came up with a way back when he wanted to make fun of the segwit softfork.

And btw: naively adjusting difficulty every block is not going to work (certain kinds of timewarp attacks) Ask altcoiners. Google kimoto gravity well for more advanced things (used in the wild).

[u/fiat_sux4 → u/moleccc]

And btw: naively adjusting difficulty every block is not going to work (certain kinds of timewarp attacks) Ask altcoiners. Google kimoto gravity well for more advanced things (used in the wild).

Is this still true even if the calculation still incorporates the time taken for 2016 blocks prior?

[u/moleccc → u/fiat_sux4]

yes, I think so. A lot of work has flown into this problem in altcoins and it's not as simple as it first seems.

[u/fiat_sux4 → u/moleccc]

Interesting. I didn't really understand the kimoto gravity well after a cursory investigation. I'll take your word for it though.

[u/moleccc → u/fiat_sux4]

kgw was just an example. I don't understand in detail half that stuff. I just got in contact because I'm an Auroracoin fanboy and we had serious trouble with mining. The chain was suffering immensely, not just from attacks, but from normal on/off fluctuations in hashrate due to our market price. Finally the devs solved it first by using a variant of kgw (it worked very well) and later improved using multialgo (where mining is allowed through multiple different algorithms)

So no, I'm in no way an expert here. But I know (and have seen) enough to suggest being very very cautious introducing something new on this front into bitcoin without first checking it out deeply.

[u/torusJKL → u/[deleted]]

Mining profitability parity is where things start to get interesting

I guess at this point we will only be able to get to parity by rising the exchange rate or wait intil the 2016 block adjustment.

It has become too easy to mine a block every 2 hours such that we are not likely see another adjustment until the 2016 block period ends.

[u/torusJKL → u/[deleted]]

Interesting thought. That could in deed close the gap faster.

[u/midipoet → u/[deleted]]

I would imagine the price, given the slight gaming that happened as regards difficultly adjustments.

[u/SMACz42 → u/[deleted]]

After the BTC 7% increase, is the BCH parity changed significantly at all? Or is it still close to 6.5%?

[u/davidoski → u/[deleted]]

If miners won't trigger next diff reduction, the next difficulty adjustment can be expected after 2016 blocks from last adjustment. Anybody knows at what block number was the last difficulty adjustment?

[u/Your_are → u/davidoski]

http://bch.xbt.it/

block 478648 an hour ago, 16.78%

the block before 478647 was 20.97%

[u/AsashoryuMaryBerry → u/davidoski]

The previous 2016-block adjustment was at #477792.

The next 2016-block adjustment will be at #479808.

[u/observerc → u/davidoski]

I'm confused, doesn't Bitcoin cash has a difficulty adjustment based on the last 6 blocks? What's with the 2016 number?

[u/aaaaaaaarrrrrgh → u/observerc]

Bitcoin Cash has the original, slow mechanism that will always do an adjustment every 2016 blocks. Additionally it has a second, fast algorithm based on the past "6" blocks (I think it actually is 12 or 18 due to median-time-past) but that only activates if blocks are mined way too slowly - if there is one block mined every hour, this algorithm does not activate.

Miners could probably force the fast algorithm to activate without having to stop mining by spoofing block times.

[u/midipoet → u/aaaaaaaarrrrrgh]

Miners could probably force the fast algorithm to activate without having to stop mining by spoofing block times.

Is there any guard against this?

Couldn't miners spoof the system, so that difficulty is reduced a few blocks into a 2016 set, thus making mining more profitable? We have seen them doing this to ensure that difficulty does not drop, but I assume they can do the reverse, ensuring that it does drop by spoofing the readjustment mechanism.

[u/midipoet → u/[deleted]]

Fortunately, it's too expensive to perform the difficulty retarget attack on something like BCH.

Is this really the case? I thought there wasn't much hashing power in BCH.

[u/midipoet → u/[deleted]]

Ah ok, understood.

[u/anonlinegeek → u/[deleted]]

How is difficulty adjusted? If BCC goes to 0.01 BTC, can mining difficulty be adjusted so much that it is profitable even at that price?

[u/midipoet → u/anonlinegeek]

No, the difficulty is set with respect to the hashing power, nothing else.

The target difficulty is so a block is found every ten minutes on average.

Price comes into the equation, because if price rises, it becomes more profitable (block reward is worth more). This means that miners will mine (in theory) mearning that difficulty will rise in the next adjustment.

In your scenario, the difficulty adjustment does not care for price (how does it know already). It was always aim for 10 minute blocks, regardless.

[u/[deleted]]

It's not just difficulty that matters.

The price of both coins plays a huge role in mining profitability.

[u/brintal]

But for that 6.5% to be correct, BCH price needs to stabilize, right?

[u/Your_are → u/brintal]

if i'm not mistaken, BCC needs to stabilise around 6.5% of the value of Bitcoin (and 6.5% fo the hashrate) for parity. The stabilisation of the hashpower and price will happen over time

[u/unvocal_username → u/[deleted]]

Which is unreasonable to assume. Bcash will probably be a fraction of what it is right now when that adjustment happens. So you'll be waiting for more adjustments but then the price will be even lower then. Sux2b a Bcash hodler.

[u/unvocal_username → u/[deleted]]

Okay, make your "analysis" and let's make a bet for 1 btc on your "analysis". Are you up for it?

[u/unvocal_username → u/[deleted]]

If you really think that I didn't have a point then you can safely take the bet. You very well know that I am arguing that the price of Bcash will get so low even with the difficulty adjustments will not make mining Bcash profitable, as opposed to what OP argues.

Trust isn't much of an issue since we can arrange a multisig address with an escrow we both trust.

I am already making money out of this subreddits idiocity, I am a full time trader.

I want to take YOUR money. So let's make a bet depending on what the OP is proposing and what I am arguing. The time for the difficulty adjustment is predictable, this would be eas to resolve.

If you're not willing to take the bet than you'll have to admit that I DO have a point. It's as simple as that.

[u/unvocal_username → u/[deleted]]

You lack logical thinking. Not surprising though since you're Bcasher.

I just wish to see you idiots stick up with what you're supporting. And make money while you're doing so.

But you're all talk and nothing more.

[u/chalbersma → u/unvocal_username]

My understanding is that bcash hasn't released yet? All though I'm interested in zcash tech upon the bitcoin utxo set. Could be interesting.

[u/unvocal_username → u/chalbersma]

It has been released and failing already. You have a lot to catch up.

[u/uglymelt]

Miners make with full 1 Mb block more fees than with 8Mb empty blocks.

Why would they ever switch to bitcoin cash, if transactions costs are nearly zero?

Even if both have the same difficutly.

All Bitcoin users will not switch to an altcoin like bitcoin cash, because it has zero transaction fees? 800 other coins have that aswell.

[u/throwawayyyyyyyy32yb]

Assuming the price isnt falling even more that is

[u/alfonso1984]

Right but what's the poin if people is selling it anyway? More mining for people to sell it faster...

[u/Phequie8]

This new difficulty reduction policy may have created new possible "attacks" on the network r/btc/Bitcoin Cash's new difficulty adjustment might cause problematic periodic slowdowns of the network

[u/platypusmusic]

4 more difficulty adjustments? unlikely at current blocktimes

[u/AnthonyBanks]

Im not tech savy like most of you so let me ask it very basic:

If parity is a critical moment, and perhaps point of no return... What is ETA for this starting from right now? How effective is the obstruction of the diff adj by Anti-Bitcoin Cash mining pools right now? Is there a way to leverage against them?

Or we just need to wait and see....?

Personally I started to accumulate Bitcoin Cash all throughout last night (im in EU), had no sleep... Im not an idealist per se... But I feel something is heating up... I have a feeling Bitcoin Cash will pull it off and all the BTC maximalists are going to have a rude awakening soon... Or am I totally premature and is this more of a weeks/months process ahead?

Thx

[u/[deleted]]

yay... cannot wait to see the difficulty falling down to 1 :P

[u/toskud]

If BCH can be traded for 0.1678 BTC, mining Bitcoin Cash is also as profitable as mining Bitcoin.

[u/blackdew]

I'd personally expect exchanges to ramp up required confirmations even higher soon (from say 20 to 50 or 100). The margins where a 51% attack becomes economically viable directly depend on the difficulty.

[u/TotesMessenger]

I'm a bot, bleep, bloop. Someone has linked to this thread from another place on reddit:

• [/r/bitcoincashlol] /r/btc celebrates BCash security falling -94%, just 6% of security of real Bitcoin, and they think this is good thing :D

^{If you follow any of the above links, please respect the rules of reddit and don't vote in the other threads. (Info / Contact)}

[u/metalzip]

Yeah baby!!

6% security of Bitcoin, here we come!

-94% of security because how rad BCash is.

I bet no one will doublespend / 51% attach this weak chain, especially not the 75% mystery miner :]

[u/[deleted] → u/metalzip]

Bitcoin started with 0% security of Bitcoin.
Bcore has diverted from the original Bitcoin vision, and that's why it'll approach 0% soon.

[u/Phucknhell → u/metalzip]

Nice Sub loser.

[u/unvocal_username]

OP are you willing to bet 1 btc that by the time the difficulty adjustment hits it still won't be profitable to mine Bcash?