Published on: 2016-03-09T23:24:15+00:00
In an email exchange between Bob McElrath and Dave Hudson, they discuss the challenges of accurately measuring the hashrate in Bitcoin. Hudson suggests a damping-based design for measurement, but McElrath expresses doubts about its accuracy over short timeframes. Additionally, the consensus data lacks a strong notion of time, making it difficult to calculate difficulty based on anything outside of the consensus.Henning Kopp expresses his thoughts on the community's process for making decisions regarding Bitcoin. He believes that the community should demonstrate a good process for making such decisions and show that they can separate meaningful underlying principles from implementation details. Another individual disagrees with Kopp's statement that the coin limit was a meaningful underlying principle while mining reward halving was an implementation detail. They provide a link to a post by Dr. Back, who had been pointing this out for some time.Bitcoin miners have invested heavily in the industry with hash rates increasing by almost 70% in the last six to seven months. However, there are several ways in which this information could be irrelevant; some miners may expect to breakeven before the halving, while others may believe that the halving will not pose any problems. In addition, many miners anticipate that the price of bitcoin will increase around the time of the halving, though others believe it could just as easily decrease. The fact that these same miners were mining when the coin price was $250 last year indicates that profitability won't be a significant concern if the price remains around $400.The problem of working out a timeframe over which to run the derivative calculations is not an easy one. From a measurement theory perspective, this can be done by treating each block as a measurement and performing error propagation to derive an error on the derivatives. Bitcoin's block timing follows the statistical theory of Poisson Point Process, and there is a lot of literature available on how to handle this.The difficulty retargeting in cryptocurrencies is a matter of concern. A damping-based design is an obvious choice for this, but the problem is working out a timeframe over which to run the derivative calculations. The measurement of hashrate is pretty inaccurate, and even 2016 events aren't enough to predict difficulty swings accurately. To react meaningfully to a significant loss of hashing, a window of around two weeks is necessary.Bitcoin developers are discussing the upcoming subsidy halving this July and the potential for a significant drop in mining rate, which could lead to longer block intervals and the block size limit being hit sooner than expected. They propose a hardfork to the difficulty adjustment algorithm so it can adapt quicker to such a drop in mining rate. Some suggest adjusting the economic parameter instead of the difficulty targeting mechanism. It is important to demonstrate a good process for making decisions and separating meaningful underlying principles from implementation details.Luke Dashjr suggests an adjustment to the reward schedule to alleviate concerns about the upcoming subsidy halving. He suggests that instead of a large supply shock every four years, the reward could drop yearly or at each difficulty adjustment in a way that smooths out the inflation curve. He believes this could increase confidence in the system if the community demonstrates a good decision-making process.The success of Bitcoin has led to discussions about hard forks and the possibility of creating a new Bitcoin. The creation of a new Bitcoin would benefit from the brand awareness of Bitcoin and would not require consensus if the market values it more than the original Bitcoin. However, a hard fork is still considered contentious, and a soft fork is preferable. It is also possible to create an altcoin with a different coin limit and a smooth inflation schedule instead of abrupt drops.In a discussion among Bitcoin developers, Gregory Maxwell questions the proposal of a large difficulty drop in the Bitcoin network, stating that it would only make sense if there was evidence suggesting a significant decrease in hashrate. Paul suggests that miners should invest in hardware closer to the halving, rather than making investments too soon. He notes that assuming miners are already located in low-power-cost areas, the difficulty will quickly rise to compensate for improvements in power efficiency, which could result in the cancellation of any benefits by July.Drak has tested code for an altcoin that could potentially address the issue of the block size limit being reached earlier than anticipated. However, it is unclear which altcoin he is referring to. Luke Dashjr argues that historically, difficulty has followed value rather than being influenced by factors such as a longer block interval and higher per-block transaction volume. Nonetheless, having prepared code for negative scenarios in case of an emergency seems reasonable. The development of a local fee market and an increase in fees could attract more miners back to the network, along with an expected higher exchange rate. Pavel Janik suggests that if the blockchain network experiences a longer block interval, it could result in a higher per-block transaction volume, potentially reaching the block size limit sooner.
Updated on: 2023-08-01T17:55:46.527931+00:00