[Bitcoin-ml] Alternative difficulty algorithm for Bitcoin Cash

Tom Zander tomz at freedommail.ch
Tue Oct 3 08:32:27 UTC 2017


On Tuesday, 3 October 2017 00:04:24 CEST freetrader wrote:
> Freezing the difficulty for 2016 blocks does not translate to a fixed time
> period of stable earnings. If hashrate moves in, blocks come faster and
> the individual miner earns less proportionally while the next difficulty
> adjustment comes quicker.

You are making a thinking error here;

if hashrate rises to 150%, then blocks come quicker in equal measure.
This causes the amount of block rewards to also go to 150% of normal.
As such, the per-miner (or per peta-hash, if you prefer) payout of Bitcoin 
stays stable for the duration of the difficulty adjustment period.

This stability is useful so a miner only has to decide at difficulty 
adjustment points if their hardware should continue running based on 
calculated profitability.



I read your points about massive and sudden price fluctuations and I can’t 
say I think this is a good way to design the system. First of all, miners 
have no requirement to sell at the moment they get a block.

But more importantly, the stability of the price of Bitcoin as measured in 
Fiat currencies is something that central banks and the “old” economy has a 
strong say over. To hardfork so you can let this influence your mining power 
is opening pandora’s box.

My last point;
it is important to realize that Bitcoin as well as Bitcoin Cash have a very 
very low velocity in its coins. A large amount of money is owned by traders. 
A high percentage of traders buying and selling the coins will naturally 
have a strong influence on the price of a coin.
If we look forward and expect the next billion users, they will not be 
trading between coins. They will be sending it from person to person. Like 
money. The amount of price movement the same amount of traders can have on a 
money that is used by a billion people is much much less than it is today in 
cryptos because they are clearly outnumbered by hodlers.

You can validate this by looking at historical price-pairs like USD/EUR.
-- 
Tom Zander
Blog: https://zander.github.io
Vlog: https://vimeo.com/channels/tomscryptochannel


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