[bitcoin-dev] New difficulty algorithm needed for SegWit2x fork? (reformatted text)

[Mark Friedenbach]

The problem of fast acting but non vulnerable difficulty adjustment algorithms is interesting. I would certainly like to see this space further explored, and even have some ideas myself.

However without commenting on the technical merits of this specific proposal, I think it must be said upfront that the stated goal is not good. The largest technical concern (ignoring governance) over B2X is that it is a rushed, poorly reviewed hard fork. Hard forks should not be rushed, and they should receive more than the usual level of expert and community review.

I’m that light, doing an even more rushed hard fork on an even newer idea with even less review would be hypocritical at best. I would suggest reframing as a hardfork wishlist research problem for the next properly planned hard fork, if one occurs. You might also find the hardfork research group a more accommodating venue for this discussion:

https://bitcoinhardforkresearch.github.io/

> On Oct 9, 2017, at 3:57 PM, Scott Roberts via bitcoin-dev <bitcoin-dev at lists.linuxfoundation.org> wrote:
> 
> Sorry, my previous email did not have the plain text I intended.
> 
> Background: 
> 
> The bitcoin difficulty algorithm does not seem to be a good one. If there 
> is a fork due to miners seeking maximum profit without due regard to 
> security, users, and nodes, the "better" coin could end up being the 
> minority chain. If 90% of hashrate is really going to at least initially go 
> towards using SegWit2x, BTC would face 10x delays in confirmations 
> until the next difficulty adjustment, negatively affecting its price relative 
> to BTC1, causing further delays from even more miner abandonment 
> (until the next adjustment). The 10% miners remaining on BTC do not 
> inevitably lose by staying to endure 10x delays because they have 10x 
> less competition, and the same situation applies to BTC1 miners. If the 
> prices are the same and stable, all seems well for everyone, other things 
> aside. But if the BTC price does not fall to reflect the decreased hashrate, 
> he situation seems to be a big problem for both coins: BTC1 miners will 
> jump back to BTC when the difficulty adjustment occurs, initiating a 
> potentially never-ending oscillation between the two coins, potentially 
> worse than what BCH is experiencing.  They will not issue coins too fast 
> like BCH because that is a side effect of the asymmetry in BCH's rise and 
> fall algorithm. 
> 
> Solution: 
> 
> Hard fork to implement a new difficulty algorithm that uses a simple rolling 
> average with a much smaller window.  Many small coins have done this as 
> a way to stop big miners from coming on and then suddenly leaving, leaving 
> constant miners stuck with a high difficulty for the rest of a (long) averaging 
> window.  Even better, adjust the reward based on recent solvetimes to 
> motivate more mining (or less) if the solvetimes are too slow (or too fast). 
> This will keep keep coin issuance rate perfectly on schedule with real time. 
> 
> I recommend the following for Bitcoin, as fast, simple, and better than any 
> other difficulty algorithm I'm aware of.  This is the result of a lot of work the 
> past year. 
> 
> === Begin difficulty algorithm === 
> # Zawy v6 difficulty algorithm (modified for bitcoin) 
> # Unmodified Zawy v6 for alt coins: 
> # http://zawy1.blogspot.com/2017/07/best-difficulty-algorithm-zawy-v1b.html 
> # All my failed attempts at something better: 
> # https://github.com/seredat/karbowanec/commit/231db5270acb2e673a641a1800be910ce345668a 
> # 
> # Keep negative solvetimes to correct bad timestamps. 
> # Do not be tempted to use: 
> # next_D = sum(last N Ds) * T / [max(last N TSs) - min(last N TSs]; 
> # ST= Solvetime, TS = timestamp 
> 
> # set constants until next hard fork: 
> 
> T=600; # coin's TargetSolvetime 
> N=30; # Averaging window. Smoother than N=15, faster response than N=60. 
> X=5; 
> limit = X^(2/N); # limit rise and fall in case of timestamp manipulation 
> adjust = 1/(1+0.67/N);  # keeps avg solvetime on track 
> 
> # begin difficulty algorithm 
> 
> avg_ST=0; avg_D=0; 
> for ( i=height;  i > height-N;  i--) {  # go through N most recent blocks 
> avg_ST += (TS[i] - TS[i-1]) / N; 
> avg_D += D[i]/N; 
> } 
> avg_ST = T*limit if avg_ST > T*limit; 
> avg_ST = T/limit if avg_ST < T/limit; 
> 
> next_D = avg_D * T / avg_ST * adjust; 
> 
> # Tim Olsen suggested changing reward to protect against hash attacks. 
> # Karbowanek coin suggested something similar. 
> # I could not find anything better than the simplest idea below. 
> # It was a great surprise that coin issuance rate came out perfect. 
> # BaseReward = coins per block 
> 
> next_reward = BaseReward * avg_ST / T; 
> 
> ======= end algo ==== 
> 
> Due to the limit and keeping negative solvetimes in a true average, 
> timestamp errors resulting in negative solvetimes are corrected in the next 
> block. Otherwise, one would need to do like Zcash and cause a 5-block 
> delay in the response by resorting to the median of past 11 blocks (MPT) 
> as the most recent timestamp, offsetting the timestamps from their 
> corresponding difficulties by 5 blocks. (it does not cause an averaging 
> problem, but it does cause a 5-block delay in the response.)
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