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

Tue Oct 10 10:34:35 UTC 2017

Yes, I agree. Hard forks should be as much scrutinized by fellow bitcoiners, i.e. developers and holders and not only rushed by miners or some other investment gurus, whose incentives are not entirely clear, to remain as decentralized as economically possible.

________________________________
From: bitcoin-dev-bounces at lists.linuxfoundation.org <bitcoin-dev-bounces at lists.linuxfoundation.org> on behalf of Mark Friedenbach via bitcoin-dev <bitcoin-dev at lists.linuxfoundation.org>
Sent: Monday, October 9, 2017 10:19 PM
To: Scott Roberts; Bitcoin Protocol Discussion
Subject: Re: [bitcoin-dev] New difficulty algorithm needed for SegWit2x fork? (reformatted text)

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/
Welcome - Bitcoin Hard Fork Research<https://bitcoinhardforkresearch.github.io/>
bitcoinhardforkresearch.github.io
Bitcoin Hard Fork Research This website will be updated with relevant ongoing information about Bitcoin hard fork research. Resources: BIP-MMHF, draft patch last ...

On Oct 9, 2017, at 3:57 PM, Scott Roberts via bitcoin-dev <bitcoin-dev at lists.linuxfoundation.org<mailto: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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