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May you please elaborate on why do you think difficulty is important and what are exactly the "mining efficiency attacks"? This is the first time ever I see som

by exo762 11y ago

May you please elaborate on why do you think difficulty is important and what are exactly the "mining efficiency attacks"? This is the first time ever I see someone mentioning this.

celticninja 11y ago
The statement makes no sense. If difficulty stabilises then it still requires between 30 and 51% to carry out an attack. Adding that to the network causes the difficulty to increase so you need more computing power to get your 30%. If we assume the bad actor already has that computing power then they could do it now or alternatively they are sitting on unused bitcoin hashing power which is becoming less useful everyday.
eterm 11y ago
Let's say that difficulty plateaus, that means that mining hardware no longer is deprecating, because output in bitcoins is dependent only on difficulty*hash rate. (It is a common misconception that hashing is a competition like a "race" and others hash rate affects how quickly you can find bitcoins.) If difficultly is stable then what matters is how efficiently you can mine, i.e. how many bitcoins you can mine relative to how much electricity you spend. Well if you control say a third of the pool, then you can obviously capture a third of the bitcoins and spend a third of the electricity. Or, you can mine alternate difficultly periods. When you mine, the next period the difficulty will be 1. Then you chose not to mine and the pool loses 1/3 of the hashing power, so next round the difficulty will be 2/3. Then it adjusts back and it will be 1 again. The result is that you get to mine at a lower difficulty than the rest of the population. The difficulty increases from your hashing is paid for by everyone else and not by you, then you get the enjoy the reduced difficulty from others not mining as fast. This becomes de-stabilising because the rational thing when faced with this is to join you on only mining the easier periods which further makes the problem worse. This effect starts happening with any amount of hashing power, even with 1% hashing rate you would see a small efficiency improvement by mining alternate difficulty periods.
- nostrademons 11y ago
  It seems like the result of this is to cycle, with a decrease in difficulty resulting in a following increase in difficulty and then an increase in difficulty resulting in a decrease in difficulty. This is meta-stable: it's not a system that converges on a single value, but it's a system that oscillates between overshooting and undershooting the true value. Plenty of systems work fine like this in nature - it's pretty much a textbook predator/prey dynamic, and yet carnivorous life has been going on for several hundred million years on Earth. It would be a problem if the dynamic was for the number of miners to drop to zero or explode to infinity instead, but this is a negative-feedback cycle, not a positive-feedback one.
  - eterm 11y ago
    It's not meta-stable because if there is a difficulty above which mining is not profitable then the oscillations will become larger and larger until eventually it is too expensive to complete the next difficult adjustment period. The easy adjustment periods will become shorter and shorter. You are wrong as characterising this as negative-feedback, this is positive feedback because if you are presented with a situation where in even "weeks" (which now last 6 days) the difficulty is 10% less than odd weeks (which now last 8 days), then you will join mining only the easy weeks which further feedsback to more distortion. edit to add: I realise the adjustment period is not aimed to be 7 days, this is for easier illustration.
    - tlrobinson 11y ago
      Interesting. It seems like a classic "tragedy of the commons" situation. Even if miners want to see Bitcoin succeed (in order to get a return on their mining hardware investment), at some point they have to join the alternating adjustment period schedule to remain profitable, making the problem worse, and riding the sinking ship down... The question is what is the "activation energy" required to initiate the oscillations. Is a large miner (how large?) likely to attempt this knowing the ultimate outcome? And more importantly, can it be fixed? The protocol isn't set in stone.
- e3b0c 11y ago

by exo762 11y ago

May you please elaborate on why do you think difficulty is important and what are exactly the "mining efficiency attacks"? This is the first time ever I see someone mentioning this.

celticninja 11y ago

The statement makes no sense. If difficulty stabilises then it still requires between 30 and 51% to carry out an attack. Adding that to the network causes the difficulty to increase so you need more computing power to get your 30%. If we assume the bad actor already has that computing power then they could do it now or alternatively they are sitting on unused bitcoin hashing power which is becoming less useful everyday.

eterm 11y ago

Let's say that difficulty plateaus, that means that mining hardware no longer is deprecating, because output in bitcoins is dependent only on difficulty*hash rate. (It is a common misconception that hashing is a competition like a "race" and others hash rate affects how quickly you can find bitcoins.) If difficultly is stable then what matters is how efficiently you can mine, i.e. how many bitcoins you can mine relative to how much electricity you spend. Well if you control say a third of the pool, then you can obviously capture a third of the bitcoins and spend a third of the electricity. Or, you can mine alternate difficultly periods. When you mine, the next period the difficulty will be 1. Then you chose not to mine and the pool loses 1/3 of the hashing power, so next round the difficulty will be 2/3. Then it adjusts back and it will be 1 again. The result is that you get to mine at a lower difficulty than the rest of the population. The difficulty increases from your hashing is paid for by everyone else and not by you, then you get the enjoy the reduced difficulty from others not mining as fast. This becomes de-stabilising because the rational thing when faced with this is to join you on only mining the easier periods which further makes the problem worse. This effect starts happening with any amount of hashing power, even with 1% hashing rate you would see a small efficiency improvement by mining alternate difficulty periods.

nostrademons 11y ago
It seems like the result of this is to cycle, with a decrease in difficulty resulting in a following increase in difficulty and then an increase in difficulty resulting in a decrease in difficulty. This is meta-stable: it's not a system that converges on a single value, but it's a system that oscillates between overshooting and undershooting the true value. Plenty of systems work fine like this in nature - it's pretty much a textbook predator/prey dynamic, and yet carnivorous life has been going on for several hundred million years on Earth. It would be a problem if the dynamic was for the number of miners to drop to zero or explode to infinity instead, but this is a negative-feedback cycle, not a positive-feedback one.
- eterm 11y ago
  It's not meta-stable because if there is a difficulty above which mining is not profitable then the oscillations will become larger and larger until eventually it is too expensive to complete the next difficult adjustment period. The easy adjustment periods will become shorter and shorter. You are wrong as characterising this as negative-feedback, this is positive feedback because if you are presented with a situation where in even "weeks" (which now last 6 days) the difficulty is 10% less than odd weeks (which now last 8 days), then you will join mining only the easy weeks which further feedsback to more distortion. edit to add: I realise the adjustment period is not aimed to be 7 days, this is for easier illustration.
  - tlrobinson 11y ago
    Interesting. It seems like a classic "tragedy of the commons" situation. Even if miners want to see Bitcoin succeed (in order to get a return on their mining hardware investment), at some point they have to join the alternating adjustment period schedule to remain profitable, making the problem worse, and riding the sinking ship down... The question is what is the "activation energy" required to initiate the oscillations. Is a large miner (how large?) likely to attempt this knowing the ultimate outcome? And more importantly, can it be fixed? The protocol isn't set in stone.
e3b0c 11y ago