Post Bitcoin mine reward: Lowering Difficulty an Option?

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Maybe my understanding of blockchain, and Bitcoin need to be refined and will allow help me understand why my question wouldn't make sense in the grand scheme.

But first Ill establish my core understandings of the current concept...

With each leading zero added for a hash to be accepted in Bitcoins blockchain, it becomes increasingly more difficult (16 times more difficult) to find an acceptable nonce, thus mine a block.

I understand that the reason these difficulties were built in were to balance the amount of compute power with how fast blocks could be mined and rewards dispersed. This not only ensures there will be rewards long into the life of the coin but also ensures the coin was not devalued by having a "too easy" mining method as it grew in popularity.

In addition, as the difficulty of mining a block increases, reward decreases, the transaction fees also increase. This incentives miners to continue mining blocks and ensuring transactions can occur long past the last reward block mined.

My question is...

In the interest of everyone involved, wouldn't it make sense if the system was built to lower the difficulty after the last reward block was mined?

If that were the case, transaction times could be increased and become much easier to mine. Meaning transactions could cost less, be faster for miners without effecting the value of Bitcoin it self.

Thoughts? Am I missing something big that would make this an impossible concept?

Boilmashstew

Posted 2019-07-24T23:02:35.073

Reputation: 1

Answers

3

The difficulty is not constantly increasing. It is increasing in response to the hashrate going up. If the hashrate would be going down instead, the difficulty would automatically go down as well.

The goal of the difficulty adjustment algorithm is to keep the average time per block at 10 minutes.

If in response to dwindling fees and/or subsidy, mining would become less profitable, we will likely see a decrease in hashrate. That would result in a reduction to the difficulty, until mining is profitable again (to some).

Pieter Wuille

Posted 2019-07-24T23:02:35.073

Reputation: 54 032

Thanks for clarifying. However isn't some of the reason for difficulty adjustments to keep in check the ease of receiving rewards? – Boilmashstew – 2019-07-25T16:04:50.280

No, they're there to control the rate of block production. – Pieter Wuille – 2019-07-25T16:05:35.660

True, but by limiting the block production you are limiting the rewards received as well. If we are looking at a max of roughly 3000~ transactions per block and a max of 144 blocks allowed to add to the blockchain daily, that is a max of 430,000~ transactions allowed per day. Maybe I should ask in a different way. What would be the downside of decreasing difficulty after rewards for mined blocks is finished in 2140~? I could see a lot of upsides. – Boilmashstew – 2019-07-25T18:24:06.663

Those are independent things. In theory there could be a more variable inter block time, which does not result in speeding up inflation (by for example making the per-block subsidy proportional to how long the block took). If you're talking about changing the inflation schedule, that can be done without affecting the difficulty/block rate. However, I expect it to be far more controversial than changing the difficulty rules. – Pieter Wuille – 2019-07-25T18:28:00.007

Thanks for sticking with me on this. Sure, any change like that would be controversial no doubt. All theoretical, but if Bitcoin is to have any long term legs in the realm of crypto-currency being used more widely, it would need to have a much larger bandwidth for transactions per day. Current global digital transactions daily are approaching 2 billion, giving Bitcoin at the max .000025% share of the market. – Boilmashstew – 2019-07-25T18:37:47.130

You're mixing now a third unrelated thing in here: transaction rate. All these things could theoretically be changed independently (a) block rate without changing subsidy or tx rate (b) tx rate without changing subsidy or block rate (c) subsidy without changing block or tx rate. All three I expect to be controversial, but some more than others. Please focus your question on one thing. – Pieter Wuille – 2019-07-25T18:44:34.013

Ill refer back to the initial post where I acknowledged my understanding of the system needs to be refined. My current understanding is that the rate of transactions being confirmed are directly dependent on blockrate (Unconfirmed transactions are confirmed once contained inside of an added block, then are removed from the mempool). Either way, it sounds like I need to brush up on my understanding then re-approach the thought. Thanks again! – Boilmashstew – 2019-07-25T19:04:42.900

Your understanding is not wrong. But perhaps you miss the possibility of say increasing the block rate while equally reducing the number of per-block transactions, or the possibility of changing the subsidy per block without changing the block rate, or increasing the per-block tx count without any other change. They're all related of course in implementation, but conceptually we can discuss these changes independently. – Pieter Wuille – 2019-07-25T19:29:50.100

Asked: 2019-07-24T23:02:35.073

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Active: 2019-07-24T23:42:35.957