4 ms·

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 ra

by 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
Will 2/3 difficulty guarantee more than twice revenue?
- tlrobinson 11y ago
  No, but profit is what matters.
exo762 11y ago
So ultimately this leads to situation when blockchain grinds to halt every two weeks of four. Will not happen. If needed btc core will be patched to calculate difficulty in some other, tamper resistent way, and miners WILL ACCEPT this patch gladly. This attack can be pulled off in economically satisfying way only then your electricity costs dominate your overall costs, i.e. you do not pay rent, wages etc. And this is false. Given miner's situation (he pays wages and rent) to use this attack effectively miner needs to represent significant part of hashing power of network. This means that his stakes are high and engaging in destructive behavior may undermine reputation of Bitcoin as network, BTC price and ultimately miner's own business. In case lower scale attack (manipulation of hashing power of a pool) pool and his operators are there to punish such behavior. EDIT: language
celticninja 11y ago
>even with 1% hashing rate you would see a small efficiency improvement by mining alternate blocks. Do you mean alternate difficulty periods, as opposed to alternate blocks (whch would mean switching on/off every 10 minutes and would not affect the difficulty significantly.
- eterm 11y ago
  Yes, sorry I mean alternate adjustment periods. I'll edit that part.
chrisfosterelli 11y ago
The problem with your theoretical attack is, as per the Bitcoin protocol, the target (which determines the difficulty) cannot change by more than a factor of 4 between rounds.[0] You can't rapidly jump between difficulties like that. [0] https://en.bitcoin.it/wiki/Target https://en.bitcoin.it/wiki/Target
- eterm 11y ago
  Even if you controlled 50% of the mining pool then it wouldn't increase by more than a factor of 4. (It would jump from 2/3 to 1). It's about the fact that you mine more efficiently not suddenly mining a lot more bitcoin. (You actually mine fewer blocks overall but at a larger reduction in running time costs than the reduction in mining.)
  - chrisfosterelli 11y ago
    The target isn't the same as the difficulty. The target is what is limited to a factor of 4, not difficulty. Mining "more bitcoin" or mining "more efficiently" don't matter. What matters is the speed at which 2016 blocks are produced network-wide.
prolixus 11y ago
I'm not sure that your example makes sense. Suppose a scenario in which there are three miners with equal hash rates and a protocol which emits 3600 coins per difficulty period. The division of coins will be approximately 1/3 per miner when everyone is running. You're a miner and decide to enact your strategy. What happens is that in higher difficulty periods your competitors who keep running constantly are making 1800 coins each. When the hash rate drops and you come on everyone gets 1200 coins each. Your expected revenue becomes 600 coins/period. The result of your strategy relative to just running constantly is halving revenue. The only variance introduced is the speed at which new blocks are generated in each period.
- rb12345 11y ago
  While it's true that your remaining miners get more coins, kWh/coin is far higher and the power costs are most likely in normal currencies. In addition, the transaction times would become highly variable, reducing the utility (and hence value) of the cryptocurrency. Given both those points, you could cause huge instabilities in hash rate assuming you could persuade enough miners to join in. The important point is that an attacker could use this just to wreck the cryptocurrency in question, although they may simply buy more coins at the lower price and profit from any rebound.
dperfect 11y ago
> The result is that you get to mine at a lower difficulty than the rest of the population. Everyone mines at the same difficulty. If you choose not to mine for a period (and the difficulty adjusts to a lower level), you're just encouraging more miners to fill your void - your absence represents new opportunity for miners who might not have been profitable at the higher/original difficulty. Even if new mining doesn't increase difficulty to the original level, you're always mining at the same difficulty as the rest of the population, so your supposed gain is everyone else's gain, meaning it's effectively non-existent. In other words, just because you can affect difficulty by temporarily choosing not to mine, your absence (and lower difficulty) does not decrease participation of other miners; if anything, it will encourage more mining and ultimately cause the difficulty to increase for everyone.

by eterm 11y ago

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

Will 2/3 difficulty guarantee more than twice revenue?

tlrobinson 11y ago
No, but profit is what matters.

exo762 11y ago

So ultimately this leads to situation when blockchain grinds to halt every two weeks of four. Will not happen. If needed btc core will be patched to calculate difficulty in some other, tamper resistent way, and miners WILL ACCEPT this patch gladly. This attack can be pulled off in economically satisfying way only then your electricity costs dominate your overall costs, i.e. you do not pay rent, wages etc. And this is false. Given miner's situation (he pays wages and rent) to use this attack effectively miner needs to represent significant part of hashing power of network. This means that his stakes are high and engaging in destructive behavior may undermine reputation of Bitcoin as network, BTC price and ultimately miner's own business. In case lower scale attack (manipulation of hashing power of a pool) pool and his operators are there to punish such behavior. EDIT: language

celticninja 11y ago

>even with 1% hashing rate you would see a small efficiency improvement by mining alternate blocks. Do you mean alternate difficulty periods, as opposed to alternate blocks (whch would mean switching on/off every 10 minutes and would not affect the difficulty significantly.

eterm 11y ago
Yes, sorry I mean alternate adjustment periods. I'll edit that part.

chrisfosterelli 11y ago

The problem with your theoretical attack is, as per the Bitcoin protocol, the target (which determines the difficulty) cannot change by more than a factor of 4 between rounds.[0] You can't rapidly jump between difficulties like that. [0] https://en.bitcoin.it/wiki/Target https://en.bitcoin.it/wiki/Target

eterm 11y ago
Even if you controlled 50% of the mining pool then it wouldn't increase by more than a factor of 4. (It would jump from 2/3 to 1). It's about the fact that you mine more efficiently not suddenly mining a lot more bitcoin. (You actually mine fewer blocks overall but at a larger reduction in running time costs than the reduction in mining.)
- chrisfosterelli 11y ago
  The target isn't the same as the difficulty. The target is what is limited to a factor of 4, not difficulty. Mining "more bitcoin" or mining "more efficiently" don't matter. What matters is the speed at which 2016 blocks are produced network-wide.

prolixus 11y ago

I'm not sure that your example makes sense. Suppose a scenario in which there are three miners with equal hash rates and a protocol which emits 3600 coins per difficulty period. The division of coins will be approximately 1/3 per miner when everyone is running. You're a miner and decide to enact your strategy. What happens is that in higher difficulty periods your competitors who keep running constantly are making 1800 coins each. When the hash rate drops and you come on everyone gets 1200 coins each. Your expected revenue becomes 600 coins/period. The result of your strategy relative to just running constantly is halving revenue. The only variance introduced is the speed at which new blocks are generated in each period.

rb12345 11y ago
While it's true that your remaining miners get more coins, kWh/coin is far higher and the power costs are most likely in normal currencies. In addition, the transaction times would become highly variable, reducing the utility (and hence value) of the cryptocurrency. Given both those points, you could cause huge instabilities in hash rate assuming you could persuade enough miners to join in. The important point is that an attacker could use this just to wreck the cryptocurrency in question, although they may simply buy more coins at the lower price and profit from any rebound.

dperfect 11y ago

> The result is that you get to mine at a lower difficulty than the rest of the population. Everyone mines at the same difficulty. If you choose not to mine for a period (and the difficulty adjusts to a lower level), you're just encouraging more miners to fill your void - your absence represents new opportunity for miners who might not have been profitable at the higher/original difficulty. Even if new mining doesn't increase difficulty to the original level, you're always mining at the same difficulty as the rest of the population, so your supposed gain is everyone else's gain, meaning it's effectively non-existent. In other words, just because you can affect difficulty by temporarily choosing not to mine, your absence (and lower difficulty) does not decrease participation of other miners; if anything, it will encourage more mining and ultimately cause the difficulty to increase for everyone.