Tag: rate

Bitcoin is currently under attack (intentionally or not) from the bcash difficulty algorithm that deviates in a stupid way from Satoshi Nakamoto's original one. This leads to extreme difficulty oscillations on the bcash chain, which affect bitcoin as well.

This is possible because bcash kept the original proof-of-work algorithm, so miners can freely choose whether to mine bitcoin or bcash.

During the phases when the bcash difficulty is very low, lots of miners jump on the bcash chain and mine an insane number of blocks, many times more than the intended 6 per hour. Bitcoin loses that hash power and becomes slow, so the fees rise.

After a few days the bcash difficulty adjusts upward, so miners jump back to bitcoin and begin to reduce the backlog. However, bcash's difficulty algorithm is senselessly asymmetric, so it adjusts down much more rapidly than up. As a consequence, its difficulty falls like a stone after 12 hours, and many miners jump back, deserting bitcoin.

If this continues, bitcoin's average block rate will be reduced until its next difficulty adjustment, causing higher fees.

More thoughts

It seems now that the oscillations that had already been predicted two days ago are getting worse.

A lot depends on whether bcash users realise that bcash, particularly its difficulty adjustment algorithm, is the cause of the oscillations and recognize that bcash was designed without full understanding of the consequences.

Some people said that this is intentional, in which case it would be a malevolent attack on bitcoin, but so far I have no indication that this is the case and don't believe it, particularly because the situation is bad for both coins, which are now limping along on a knife's edge.

So what will happen? The situation is so bad for everybody that it looks as if at least one chain will have to lose market capitalization relatively soon. Nobody will put up with this in the long run.

Interesting questions are how the price of bcash relative to bitcoin influences the outcome, whether rapid SegWit adoption will help bitcoin, and whether bitcoin users will stay the line for long enough.

It would be very sad if a hard fork like bcash severely damaged the entire cryptocoin realm. But the miners have never been quick to recognize when they were working towards their own demise. Moreover, they always suffer from the Tragedy of the Commons, where coordinated action could save us, but each single miner profits more in the short term from accelerating the catastrophe.