0

Maybe my understanding of blockchain, and Bitcoin need to be refined and will allow help me understand why my question wouldn't make sense in the grand scheme.

But first Ill establish my core understandings of the current concept...

With each leading zero added for a hash to be accepted in Bitcoins blockchain, it becomes increasingly more difficult (16 times more difficult) to find an acceptable nonce, thus mine a block.

I understand that the reason these difficulties were built in were to balance the amount of compute power with how fast blocks could be mined and rewards dispersed. This not only ensures there will be rewards long into the life of the coin but also ensures the coin was not devalued by having a "too easy" mining method as it grew in popularity.

In addition, as the difficulty of mining a block increases, reward decreases, the transaction fees also increase. This incentives miners to continue mining blocks and ensuring transactions can occur long past the last reward block mined.

My question is...

In the interest of everyone involved, wouldn't it make sense if the system was built to lower the difficulty after the last reward block was mined?

If that were the case, transaction times could be increased and become much easier to mine. Meaning transactions could cost less, be faster for miners without effecting the value of Bitcoin it self.

Thoughts? Am I missing something big that would make this an impossible concept?

3

The difficulty is not constantly increasing. It is increasing in response to the hashrate going up. If the hashrate would be going down instead, the difficulty would automatically go down as well.

The goal of the difficulty adjustment algorithm is to keep the average time per block at 10 minutes.

If in response to dwindling fees and/or subsidy, mining would become less profitable, we will likely see a decrease in hashrate. That would result in a reduction to the difficulty, until mining is profitable again (to some).

  • Thanks for clarifying. However isn't some of the reason for difficulty adjustments to keep in check the ease of receiving rewards? – Boilmashstew Jul 25 at 16:04
  • No, they're there to control the rate of block production. – Pieter Wuille Jul 25 at 16:05
  • True, but by limiting the block production you are limiting the rewards received as well. If we are looking at a max of roughly 3000~ transactions per block and a max of 144 blocks allowed to add to the blockchain daily, that is a max of 430,000~ transactions allowed per day. Maybe I should ask in a different way. What would be the downside of decreasing difficulty after rewards for mined blocks is finished in 2140~? I could see a lot of upsides. – Boilmashstew Jul 25 at 18:24
  • Those are independent things. In theory there could be a more variable inter block time, which does not result in speeding up inflation (by for example making the per-block subsidy proportional to how long the block took). If you're talking about changing the inflation schedule, that can be done without affecting the difficulty/block rate. However, I expect it to be far more controversial than changing the difficulty rules. – Pieter Wuille Jul 25 at 18:28
  • Thanks for sticking with me on this. Sure, any change like that would be controversial no doubt. All theoretical, but if Bitcoin is to have any long term legs in the realm of crypto-currency being used more widely, it would need to have a much larger bandwidth for transactions per day. Current global digital transactions daily are approaching 2 billion, giving Bitcoin at the max .000025% share of the market. – Boilmashstew Jul 25 at 18:37

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.