Subject: Re: [bitcoin-dev] Hardfork to fix difficulty drop algorithm

From: Paul Sztorc <[email-masked]>
Date: Wed, 9 Mar 2016 12:58:18 -0500

My recent conversations with miners revealed:

* Many have made "extra-large" hardware investments recently.
* Some wonder if we have just reached (or are quickly reaching) a
plateau of hardware-efficiency. This would mean that
hardware-investments might not be made in the critical period
immediately preceding the halving.

However, some good news:

* For Chinese miners, power is often purchased in fixed quantities, for
long-durations (of around 12 months, and these contracts -fortunately-
do overlap the July halving). Because power is difficult to store, this
implies that miners will *need* to mine, at all times, even at a loss.
So miners may continue to mine after the halving, no matter what.

On the other hand, miners can default on these contracts by simply
declaring bankruptcy, at which point their equipment would be entirely
unusable, by anyone, for a very long time.

So the problem is less likely, but more potentially-catastrophic.

Paul

On 3/2/2016 8:06 PM, Paul Sztorc wrote:
>
> On 3/2/2016 12:53 PM, Gregory Maxwell via bitcoin-dev wrote:
>> What you are proposing makes sense only if it was believed that a very
>> large difficulty drop would be very likely.
>>
>> This appears to be almost certainly untrue-- consider-- look how long
>> ago since hashrate was 50% of what it is now, or 25% of what it is
>> now-- this is strong evidence that supermajority of the hashrate is
>> equipment with state of the art power efficiency.
> I don't understand the relevance of this.
>
> In my view, we would prefer miners to invest in hardware just a mere
> 2016 blocks away from the halving. Instead, they've made them too soon.
> Assuming that miners are already located in low-power-cost areas, the
> difficulty will be quickly rising to compensate for "state of the art
> power efficiency".
>
> So it will have canceled out by July.
>
> If anything, the more efficient miners become today, the bigger our
> potential problem in July, because chip-manufacturers may have used up
> all of the easy efficiency-increasing moves, such that investments do
> not take place in June.
>
> Paul