3

Bitcoin mining difficulty has been through some interesting ups and downs lately. (I've supplied snapshots below to give context for future readers)

Considering its long history of pretty much only going up for years, I'm wondering what people involved with mining should think about this.

Some base questions:

  • What is the primary cause? Are miners leaving as new ones come it, or are new ones no longer interested?
  • Why are miners leaving/not starting?
  • If it truly is leveling, or at least resuming a slight growth pattern, how does this affect Bitcoin price in general? What about during "events" such as halving of the block reward?
  • In principal, should Bitcoin value be related to difficulty in a predictable way, and is this leveling something that facilitates that or not?
  • Lastly, does a stable difficulty help encourage Bitcoin's use in anyway? In other words, if people aren't getting into mining but are getting into Bitcoin, do they generally consider difficulty as a factor in this decision?

I'm not necessarily asking that you answer all those questions. Instead, I'm trying to show that I am interested in how an extended period of leveled and stable difficulty, as we seem to be heading into (Spring 2015), affects the economics of Bitcoin mining and use.


Here's snapshots of that page (clickable):

Main points. Predict -2% change in 4 days. Hashrate vs. Difficulty (9 Months) Time vs. Difficulty Difficulty History Table

  • The idea of this website is to ask one question at a time. Most or all of these questions have actually already been answered. – Jannes Mar 19 '15 at 13:09
  • 2
    @Jannes Some links would help make your case. – fredsbend Mar 19 '15 at 17:49
3

It's pretty easy. The first asics where based on 90's technology, current asics are almost cought up now to recent chip technology.

So the asic industry has camped 15 years of tech advancement into 2 years. Every couple of months the new asics where more than twice as fast. That caused the rapid hash increase.

Now that they are caught up with current tech we will go back to 10% efficienty increase per year again. Like in the gpu days. Back then the difficulty raised very slowely because gpu's also had a 10% efficienty increase per year on avarage. When gpu's came to the scene you saw the same rapid growth that flattned again when everybody had switched to gpu's. The only reason it was just a short period is because retail gpu's where allready in line with the chiptechnology of the time.

Now that asic efficienty improvements are in line with the industry the only way to increase hashpower is to have more machines instead of ever faster machines.

All that you are seeing is growth in hashes per watt flattning out, and with it difficulty growth flattning.

2

I'm a newer enthusiast to the world of Bitcoin and Bitcoin mining, but I can try to help answer your questions as best as possible (or more just take a shot in the dark for fun):

  • My guess is that the cause of this slight loss of momentum in the mining difficulty is because, yes, new miners are becoming discouraged and not joining. In 2015, mining is straight-out not profitable unless you unload a few hundred/few thousand dollars into the best hardware. A hash rate of 100 Mh/s off of a common laptop used to be phenomenal and lucrative. Now, thanks to the influx of people building mining rigs that reach up to terahashes per second, new miners, and even current miners with smaller hash rates are beginning to lose interest in a realm of computational giants. The centralization of mining of the decentralized currency is beginning to discourage people.
  • As I said, people are getting discouraged that only investing tons of money can put you on the map, and therefore less and less people are starting to throw themselves in.
  • This is probably completely inaccurate, but since I'm a beginner, I'll go ahead and try and see if this is anywhere near correct: The value of the bitcoin will not fluctuate as much due to mining trends as it will with usage and popularity. Sure, increase in difficulty does technically mean that the coin is becoming more and more secure encryption-wise, but the coin only has as much value as people believe it does, which is why as it becomes more and more popular and more and more applicable, its value is not only going to stabilize but perhaps increase. (I'm not an economist, I'm a hobbyist, I apologize if that's completely wrong)
  • I don't think so. Again, yes, difficulty does indirectly equal how secure the currency is, however I would like to think that there are other far more significant factors that economically impact the Bitcoin in greater ways than mining difficulty, seeing as the network is already as big as it is today and is not going to lose huge amounts of difficulty (and if it does to a certain extent, profitability in mining will spike and miners will return to mining).
  • As Bitcoin matures, lots of the mining aspect of it is becoming abstract to the public, which is really the concept this answer is revolving around. As time goes on and mining becomes exclusive to people who have the best hardware (slowly centralizing the currency, and hence, defeating one of Bitcoin's original purposes), the general public will not even discover the wonders of mining, know the current difficulty, or try to achieve a profitable hash rate--just as people do not know or attempt to replicate the technicalities of minting dollar bill. In 2015, yes, people are still considering difficulty when they choose to begin to use Bitcoin because it's a signal as to whether the Bitcoin community is thriving or in distress. I think that people see the stabilizing difficulty as a temporary stabilizing of the encryption behind the currency itself and not as much its practical application. However, in the future, if Bitcoin survives the next few years, difficulty may become obsolete to the next guy starting to use Bitcoin.

So that's my two cents on the topic...or should I say... at the time of writing, that's my 0.000076 BTC.

  • Here's a plus one for the effort. Welcome to the site. – fredsbend Jul 8 '15 at 7:10
  • A few points: Mining hardware becoming more expensive equates to the barrier of entry for mining increasing, which in turn might cause mining centralization, but it is a steep argument to equate expensive hardware to currency centralization. Bitcoin doesn't use encryption, so I think what you mean is "security of Bitcoin network". Otherwise, good work. – Murch Jul 8 '15 at 10:25

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.