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1. Price goes down 2. Miners become disincentivized to mine 3. Some miners shut off machinery 4. Network mining difficulty adjusts to new equilibrium Same a
by chizhik-pyzhik 4y ago
1. Price goes down
2. Miners become disincentivized to mine
3. Some miners shut off machinery
4. Network mining difficulty adjusts to new equilibrium
Same action occurs in the opposite direction when the price rises
- Imnimo 4y agoI remember reading that it's hypothetically possible for Bitcoin to get caught in a trap if the price falls extremely precipitously. The difficulty only gets adjusted after a certain number of blocks, and if the profitability of mining drops fast enough, you could find a situation where it is impractical to mine enough blocks to trigger the difficulty adjustment. My impression was that this was mostly just a problem in theory, and would not be triggered by the sort of decline in prices we're seeing in recent days. I assume the same is true for Ethereum?
- nly 4y agoSurely miners would just take the short term loss to be the last man standing at the other side?
- pedrocr 4y agoI'll just wait for you to take that short term loss and restart the mining when it's profitable again. Since that's what everyone thinks there's an incentive trap there. And now someone that actually does decide to take the loss has an incentive to make a 50%+ attack on the network to double spend their way into profitability.
- jpgvm 4y agoNot a crypto fan but regarding the 51%+ attack that is sort of covered by game theory. By performing the double spend they doom the network itself so it will either be forked so it may continue or entirely die out. Either way the party carrying out the attack is unlikely to be able to benefit from it, especially if a prerequisite of the viability of the attack is the network already being incredibly week.
- deltree7 4y agoi) Hedge Funds can easily carry out this a) Short all of PoW cryptocurrencies b) Carry Out 51% attack c) Profit. ii) Nation States can easily carry out this. a) Carry Out 51%. b) Shut the assholes who parrot, "Hurr Durr Crypto is better than fiat" once for all At this point, it is only the will that is not there, not the capability
- Imnimo 4y agoI don't follow. In what sense would they be the last man standing?
- nostrademons 4y agoAll other miners drop out of the market because it's unprofitable. That leaves you as the only remaining Bitcoin miner. Wouldn't this leave the network extremely vulnerable to 51% attacks though? If the recovery mode is that miners keep mining in the hopes of being the last man standing so that they can control the chain afterwards, then... Nevermind, just answered my own question. Multiple miners are likely to keep mining in the hopes of being the last one standing and being able to 51% Bitcoin, which will keep mining competitive and get you to the block difficulty adjustment even if it's momentarily unprofitable.
- Imnimo 4y agoMaybe I'm missing a key detail here. Let's say Alice, Bob and Carol (and no one else) are all mining bitcoin. For simplicity, one block is mined per day, the block reward is worth $300, and so the system is in equilibrium when they all spend $100 a day on electricity. Difficulty adjusts every 10 blocks. Now the value of bitcoin drops precipitously - let's say they wake up one day and the block reward is worth $3. Let's say they all shut off their machines. Dave wakes up and sees no one is mining bitcoin, and thinks "I can be the last one standing". He now has to spend $300 * 10 = $3000 (in the worst case where the drop is right after the last adjustment) to mine ten blocks, for which he receives $30 worth of rewards. But how does this help him? If the difficulty adjusts downward, Alice, Bob and Carol can all just start mining again. It's not like they're permanently locked out of the system because they turned off their mining rigs. So Dave has spent net $2970 for...what exactly? The ability to run a 51% attack and double spend to recoup his cost? To run the double-spend, he has to re-mine a second side chain at the way-too-high difficulty! I'm skeptical that this is an attractive proposition for Dave.
- imtringued 4y agoNo, miners would charge the full electricity cost as transaction fee and hope someone pays the transaction fee.
- linschn 4y agoThat is not how it works. The author of the transaction decides the transaction fee. If nobody has put a high transactionnfee in their transaction, you can't include it into the block you are mining.
- saurik 4y agoWhich means you wouldn't bother trying to mine a block. Seeing that no one is bothering to try to mine a block--and so their transactions are taking forever to complete--people would increase the fees they are putting on their transactions (which doesn't even require them to know what is going on, as that's what they would presumably try to do anyway) and eventually enough high-value transactions would exist to make it worth trying to mine a block with them included.
- dilyevsky 4y agoI think it’s roughly two weeks
- aaron695 4y ago
- chizhik-pyzhik 4y agoBitcoin difficulty adjusts every 2016 blocks (10 min blocks * 2016 = 2 weeks), but ethereum difficulty adjusts every block, so presumably ethereum wouldn't be affected by this. Even if this did occur to Bitcoin, the community and miners would likely work together to put out a hardfork that adjusts difficulty downward to start the chain.
- usrn 4y agoSo this could trigger the flippining.
- cowvin 4y agoHow long does it take for the difficulty to adjust to the current prices? Something like weeks, right?
- viraptor 4y agoIt already happened https://2miners.com/eth-network-difficulty https://2miners.com/eth-network-difficulty the adjustment happens continuously with new blocks every ~14s, so the response is pretty quick.