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Sorry if this is a dumb question, but does a single party control the difficulty level of Ethereum and Bitcoin? If so, it seems like they have massive control o

Sorry if this is a dumb question, but does a single party control the difficulty level of Ethereum and Bitcoin? If so, it seems like they have massive control over the market. If not, how does it work?

TazeTSchnitzel 9y ago
The network collectively determines the difficulty based on how much compute power is being used. Specifically, it adjusts the difficulty up or down based on whether blocks are being found (relative to a constant expected duration) too quickly or too slowly respectively, which ensures the time taken to find blocks stays within a small interval. The specifics of how Bitcoin does it can be found here: https://en.bitcoin.it/wiki/Difficulty https://en.bitcoin.it/wiki/Difficulty
- ue_ 9y ago
  How does "the network" decide this? And what's stopping me from setting the constant to something lower in my own mining code? Does it follow that if most people in the network are duped into a ridiculously high difficulty, that it will be impossible to mine more BTC?
  - maxerickson 9y ago
    The difficulty calculation is built into the software. Solutions to the meaningless problem that must be solved to "win" a block are rejected if they don't match the network difficulty, so setting it low on your computer just wastes your computation entirely.
  - ufo 9y ago
    > And what's stopping me from setting the constant to something lower in my own mining code? The difficulty constant is determined by an algorithm that takes into account the average time that it currently takes for a new block to be mined. It tries to balance difficulty so one block is mined every 10 minutes, on average (if blocks are being mined too fast the difficulty increases, if blocks are taking too long to mine it decreases). This algorithm is part of the "bitcoin protocol" and you can't just change it in your own mining code because the other nodes in the network will not recognize your blocks as valid if you use the wrong difficulty constant > Does it follow that if most people in the network are duped into a ridiculously high difficulty, that it will be impossible to mine more BTC? This is kind of what has already happened. Nowadays there is specialized bitcoin mining hardware out there which is has driven the difficulty into the stratosphere. Bitcoin mining using CPUs and GPUs has become unprofitable, which is why the small miners have moved on to alternative cryptocurrencies where they won't need to compete with specialized hardware.
    - ue_ 9y ago
      Thanks for the response. Out of interest, what are the smaller currencies that may still be profitable to mine with a 2012ish GPU, aside from Etherum? I've read that LTC is unprofitable, for example.
      - ufo 9y ago
        The value of the smaller currencies is tied to the value of bitcoin and bitcoin is down 30% this month so I doubt that there will be much profit to be made here today.
colordrops 9y ago
I don't know about Ethereum, but in Bitcoin the amount of time previous blocks took to be found is used as an indicator of hash rate, and the difficulty is automatically adjusted to keep block generation at about 10 minutes per block, so no, it's not centralized. There isn't really anything that is truly centralized in BTC.
benchaney 9y ago
The target amount of time per block was set as a global constant (1 block every 10 minutes for bitcoin, 1 block every 15 seconds for ethereum). At fixed intervals, the difficulty is adjusted based on the actual rate of mining. The computation is deterministic, and agreed upon using the standard consensus mechanism. No individual controls it.
- dewhelmed 9y ago
  So does that mean the network is now demanding each ether be mined every 12 seconds (20% harder statistic mentioned in the linked article), or the difficulty has increased naturally? E.g. there has been a large spike in the number of ether miners lately, which has caused the network to naturally readjust the difficulty to maintain the 15s/ether mining rate? If so, these GPU miners leaving the field would readjust the difficulty back again towards the original levels, or is this difficulty change a more permanent thing due to some underlying change in the technology?
  - benchaney 9y ago
    > So does that mean the network is now demanding each ether be mined every 12 seconds You have it backwards. A 20% increase in difficulty would mean that a block was only being mined once every 18s. The intuition is that if there are fewer blocks, then it is harder to get one. I think this change is due to the etherium difficulty bomb: https://www.google.com/amp/s/themerkle.com/what-is-the-ethereum-difficulty-bomb/amp/ https://www.google.com/amp/s/themerkle.com/what-is-the-ether...

TazeTSchnitzel 9y ago

The network collectively determines the difficulty based on how much compute power is being used. Specifically, it adjusts the difficulty up or down based on whether blocks are being found (relative to a constant expected duration) too quickly or too slowly respectively, which ensures the time taken to find blocks stays within a small interval. The specifics of how Bitcoin does it can be found here: https://en.bitcoin.it/wiki/Difficulty https://en.bitcoin.it/wiki/Difficulty

ue_ 9y ago
How does "the network" decide this? And what's stopping me from setting the constant to something lower in my own mining code? Does it follow that if most people in the network are duped into a ridiculously high difficulty, that it will be impossible to mine more BTC?
- maxerickson 9y ago
  The difficulty calculation is built into the software. Solutions to the meaningless problem that must be solved to "win" a block are rejected if they don't match the network difficulty, so setting it low on your computer just wastes your computation entirely.
- ufo 9y ago
  > And what's stopping me from setting the constant to something lower in my own mining code? The difficulty constant is determined by an algorithm that takes into account the average time that it currently takes for a new block to be mined. It tries to balance difficulty so one block is mined every 10 minutes, on average (if blocks are being mined too fast the difficulty increases, if blocks are taking too long to mine it decreases). This algorithm is part of the "bitcoin protocol" and you can't just change it in your own mining code because the other nodes in the network will not recognize your blocks as valid if you use the wrong difficulty constant > Does it follow that if most people in the network are duped into a ridiculously high difficulty, that it will be impossible to mine more BTC? This is kind of what has already happened. Nowadays there is specialized bitcoin mining hardware out there which is has driven the difficulty into the stratosphere. Bitcoin mining using CPUs and GPUs has become unprofitable, which is why the small miners have moved on to alternative cryptocurrencies where they won't need to compete with specialized hardware.
  - ue_ 9y ago
    Thanks for the response. Out of interest, what are the smaller currencies that may still be profitable to mine with a 2012ish GPU, aside from Etherum? I've read that LTC is unprofitable, for example.
    - ufo 9y ago
      The value of the smaller currencies is tied to the value of bitcoin and bitcoin is down 30% this month so I doubt that there will be much profit to be made here today.

colordrops 9y ago

I don't know about Ethereum, but in Bitcoin the amount of time previous blocks took to be found is used as an indicator of hash rate, and the difficulty is automatically adjusted to keep block generation at about 10 minutes per block, so no, it's not centralized. There isn't really anything that is truly centralized in BTC.

benchaney 9y ago

The target amount of time per block was set as a global constant (1 block every 10 minutes for bitcoin, 1 block every 15 seconds for ethereum). At fixed intervals, the difficulty is adjusted based on the actual rate of mining. The computation is deterministic, and agreed upon using the standard consensus mechanism. No individual controls it.

dewhelmed 9y ago
So does that mean the network is now demanding each ether be mined every 12 seconds (20% harder statistic mentioned in the linked article), or the difficulty has increased naturally? E.g. there has been a large spike in the number of ether miners lately, which has caused the network to naturally readjust the difficulty to maintain the 15s/ether mining rate? If so, these GPU miners leaving the field would readjust the difficulty back again towards the original levels, or is this difficulty change a more permanent thing due to some underlying change in the technology?
- benchaney 9y ago
  > So does that mean the network is now demanding each ether be mined every 12 seconds You have it backwards. A 20% increase in difficulty would mean that a block was only being mined once every 18s. The intuition is that if there are fewer blocks, then it is harder to get one. I think this change is due to the etherium difficulty bomb: https://www.google.com/amp/s/themerkle.com/what-is-the-ethereum-difficulty-bomb/amp/ https://www.google.com/amp/s/themerkle.com/what-is-the-ether...