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Is the purpose of difficulty only to manage the rate of a cryptocurrency's creation, or should difficulty also increase over time to compensate for Moore's Law for a consistent level of security?

Would a cryptocurrency with an extremely short difficulty time of < 5 seconds, even 1 second, be secure?

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The purpose of the difficulty is to maintain a 10 minutes average delay between each block and by the way to ensure the Bitcoin emission rate.

The difficulty is adjusted every 2016 Blocks (2 weeks) to compensate the increase or the decrease of the network calculation power.

If the difficulty is so low that the network generates blocks in less than 5 seconds this would be highly unsecure because this would not let time for the blocks to be shared on the network. The result would be a lot of orphan blocks.

Some altcoins were launched with 15 seconds blocks target. Many of them like smallChange failled and doesn't exists anymore.

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    As far as I know there is no altcoin with less than 15 seconds blocks target. Worldcoin is the only one that worked for some time using 15 seconds block target but they updated it to 30 seconds because of the orphan block problem. But having fast block target doesn't mean that transactions will be much faster. Look at Litecoin they have 2.5 minutes block target but they need 6 confirmations (about 18minutes) before a transaction is valid. Bitcoin has a 10minutes block target but it only needs 3 confirmations (about 30 minutes). – Jan Moritz Dec 13 '13 at 20:27
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    I think that it wouldn't really help. Bitcoin is decentralized so every client is connected to about 8 other clients. If there are 8,000 clients it would still take some seconds independently on the block size before every body will get the new block. – Jan Moritz Dec 13 '13 at 20:32
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    You can open a new question but I don't think "instantaneous" verification will ever be possible using a bitcoin like protocol. – Jan Moritz Dec 13 '13 at 20:38
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    Joe Pineda asked the right question : how much safety do you need? 99%, 99.99% 99,99999...%? If you are a bar selling beers you probably don't need to wait the payment to be included in any block. Like blocks, transactions are also shared to all Bitcoin clients. The honest miners will only try to include the first transaction they received and reject any double spend attempt. So if you wait lets say 5 seconds and your client not received any double spend attempt you can be pretty sure that you'll get the coins because all the miners should already have received your transaction first. – Jan Moritz Dec 14 '13 at 5:40
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    If you are a ATM company it would not be an so great idea to not wait any confirmations because with so huge amounts in the game some people will may be try to mine their own block. They need just to create a block in which one they spend the money back to themselves letting the transaction to the ATM become invalid. Other miners will continue to work on this 'fraudulent' block because of course it's still a valid block. So the solution they implemented is to verify the identity of the customer. So if something goes wrong they can find him later to ask their money back. – Jan Moritz Dec 14 '13 at 5:50

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