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Bitcoin Bloodbath

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  • Tue, Jan 08, 2019 - 06:55pm   (Reply to #13)

    #31
    mrees999

    mrees999

    Status Gold Member (Offline)

    Joined: Aug 16 2013

    Posts: 375

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    Miner participation

The bitcoin program that all miners run has an automatic throttle mechanism so that the average time it takes to complete a block of transactions is 10 minutes. It doesn’t matter how many miners do the processing work (mining). It could be two machine – if so, the program would adjust the cryptographic lottery to find the random miner between just the two machines to process the transactions.

This, of course, is the extreme example. The program reevaluates itself after about a two week period to make adjustments when needed.  This is called “mining difficulty”. It usually goes up as miners chase profit and add their machine in hopes of winning the lotto. But the difficulty also goes down on occasion when the price doesn’t justify the cost of electricity. 

 

The difficulty graph is tracked publicly here:

This action creates equilibrium. The price and profit should always follow the price of the most efficient miners at the efficient costs in a competitive market. Although some miners are willing to mine below profit margins in speculation. For some people, the attraction of having ‘virgin’ coins without a history is worth the premium.

 

That said, if there was a huge drop in price and a lot of miners dropped off the network at once, in the worst timing scenario – the network might be somewhat unusable while the difficulty is too hard for the existing miners to win the lottery.  If half the miners of the world suddenly stopped – it might take an average of 20 minutes to win the lotto vs 10 minutes each block until the throttle action is in effect.

Other blockchains adjust every few seconds, bitcoin is perhaps the worst at this action. This action cannot be reprogrammed without changing the overall limit of 21 million bitcoins ever created over the next 100 years. It’s a hard limit – which is one of the attractions. Any change would have to be accepted by all the programmers and miners. They have no incentive to devalue their own holdings. Like it or not – 10 minutes and the difficulty is built in “feature'” not a bug.

 

 

 

 

 

 

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