OP_DIFFICULTY to enable difficulty hedges (bets) without an oracle and 3rd party. [combined summary]


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Published on: 2019-05-24T16:23:38+00:00

Summary:

Tamas Blummer, a blockchain developer, has proposed a new opcode called OP_DIFFICULTY that aims to provide a native solution to hedge risks in Bitcoin mining. The proposed transaction would only be valid after the difficulty-adjusted block in the future. It would involve a multi-sig escrow from participants in the bet, with the winner broadcasting the result. This proposal aligns with Bitcoin's aim to avoid third-party intermediaries and addresses the significant economic interest of the Bitcoin economy.However, there are concerns about the implementation of this proposal. Pieter Wuille has raised concerns about potential complications in implementing mempools and determining the validity of unconfirmed transactions if the difficulty can be directly observed by the script language. Tamas Blummer acknowledges these concerns and suggests that similar constructions are needed for observing block difficulty as for observing block time/height.Nathan Cook proposes an alternative approach using OP_CHECKBLOCKATHEIGHT, but Tamas points out that this opcode fetches the block hash rather than the content of the header, making it unsuitable for comparing difficulty levels. Despite these concerns and alternative suggestions, Tamas Blummer believes that his proposal offers a better solution than traditional commodity markets' futures and options.The current method of using nLocktime denominated in block height to hedge risks in Bitcoin mining has limitations. Blummer argues that a native solution within Bitcoin may be more efficient. The proposed OP_DIFFICULTY opcode would put the value of difficulty onto the stack for the block the transaction is included in. By comparing this value with a strike, the transaction can be executed without counterparty risk and without relying on an oracle to settle the bet.Blummer plans to draft a BIP (Bitcoin Improvement Proposal) for the OP_DIFFICULTY opcode and invites others to provide feedback or contribute to its further development.

Updated on: 2023-08-02T00:54:46.994984+00:00