Replying to Avatar a source familiar with the matter

the difficulty adjustment takes time... that was part of my argument... if calculation activity drops the blocks take longer to calculate and the difficulty adjustment takes longer to occur

If discovery of new tokens is slightly unprofitable, transaction fees will take up the slack and difficulty will adjust over time. If discovery is tremendously unprofitable it can exceed the tolerance for users to pay the higher transaction fees.
Avatar
mrclownworld 1y ago

Fees are not affected by the profitability of mining, but the other way around.

Your theoretical point about the difficulty adjustment is interesting. In the case of a sudden -99% drop in hash power the very beginning of a new period, the difficulty adjustment period could go from 2 weeks to 200 weeks. That’s interesting to imagine but it would just cause a backlog of transactions that would make each block more profitable to mine, incentivizing new participants to come in and mine, reducing the block time. And all of this would of course resolve itself when the adjustment period finally ended.

A super massive -50% drop in hash rate would only double the block time to 20 minutes and the period to 4 weeks before adjusting the difficulty.

This is a really interesting thought experiment, but like many things in bitcoin, it seems mathematically improbable.

Reply to this note

Please Login to reply.

Discussion

Avatar
a source familiar with the matter 1y ago

reward tokens insufficiently profitable to calculate implies that for calculation to happen fees must go up

I don't think a backlog of transactions can incentivize more calculation except by bidding up the fees... isn't there a limit to how many new transactions a single block can contain?

Avatar
mrclownworld 1y ago

That’s exactly how a backlog of transactions incentivizes more hashing (more precise term than calculation). Block production slows down, meaning more transactions bid for the next block, meaning the fees they bid go up.

In our current epoch, the block reward is bigger than the fees, but this will change much sooner than people realize (10-20 years from now if demand for blockspace simply remains constant)

There is a supply and demand relationship for blockspace, with a hard limitation imposed by the difficulty adjustment.

The difficulty adjustment also causes the blockchain to be a reliable notarization service - 10 years of blocks can only be made over 10 years. And that’s really what this whole system is - an (effectively) immutable notary