Topic: 10 minutes blockchain vs difficulty level - page 2. (Read 1865 times)

It's like saying "You are guaranteed to have a complete decentralized government and freedom, only if you live on top of the mountain and never to come down to the flat land, and only pay a small amount of tax (only 50% of your income) and oh by the way, report to where you are about every 15 minutes - other than that you are a lucky man to live in such a decentralized and free system - you can thanks us later by sharing with us every bitcoins you ever own...and don't worry, you will have the complete anonymity, so long that you provide us your public address, as well as your Private/ secret keys"

I've been giving a lot of thought to this lately. While I understand that Proof-of-Work is currently intrinsically wasteful, I've been trying to find a way that makes it much more energy efficient while maintaining security and functionality.

The way Bitcoin is coded currently, the 10-minute block is a constant that must be maintained to prevent block rewards from flooding the network and pushing the price down, as well as preventing orphaned blocks. However, what if difficulty was fixed, the block reward was eliminated, and block creation was driven by network transaction activity instead?

What I have devised so far is that each block is limited to 50 transactions (arbitrary number, could be higher or lower based on Bitcoin's throughput, but this figure works for Litecoin currently), and once there are 50 transactions in the mempool, they are grouped together into a work unit, and sent to a specific miner/pool for hashing. With a fixed difficulty, crunch time is based purely on that miner's hash rate, but is ideally less than a minute. Once hashing is complete on that block/workunit, it is broadcast to the network and added to the chain. However, before being added to the chain, that block must be crunched and verified by 5 other, randomly selected miners. So, each time a work unit is created by the network, it is sent to at least 6 totally random miners (not based on hash rate, wallet balance, etc.), and the block must have 6 results that jive before being added to the blockchain. The miner selection is done by group consensus of all core nodes (each randomly votes 10 miners, top 6 are selected by popular vote). Additionally, the top 6 miners are prevented from working on the block following the one they worked on (same miner can't crunch two blocks in a row). This prevents an entity running several malicious nodes/miners from taking control of the blockchain.

Now, how do I account for eliminating the block reward? That's simple. The transaction fee is hard-coded at .1% of the transaction amount. So, if someone sends 1 BTC (at the moment, valued at roughly $11,000), the transaction fee would be .001 BTC, or $11. If someone sends $5, the fee would be .5 cents. So, if a block's 50 transactions move a total of 25 BTC, the 6 miners that returned valid hashes would split the .025 BTC of transaction fees evenly (at current price of $11,000, each of the 6 miners would get $45.83 for solving that block). That accounts for miner rewards and transaction fees, but how does this add coins to the network? It would also be hard-coded that depending on the number of coins in circulation compared to the designed max coins, a certain number of additional miner hashes would be credited similar to the transaction fees. While I haven't pinned down appropriate numbers yet, say an additional 10 valid hashes are broadcast after the initial 6. The first 10 valid hashes submitted would get an equivalent BTC amount to what each of the 6 miners received in transaction fees. So, in total, 16 miners would receive .0041667 BTC each for a total reward of .0666667 BTC for that block, and of that, .0416667 BTC would be new to the network. As market cap reaches 100% in circulation, the number of "follower" miners would be reduced, similar to how the block reward halves currently. The timeline for market growth would then be tied to transaction activity, not time.

Blocks come as fast or slow as transactions are happening, and the next group of 50 transactions can only be confirmed once the previous block has been fully verified by the 6 random miners. And if there are insufficient transactions in the mempool, block creation has a backup timer that kicks out work units 5 minutes after the previous block in case 50 transactions haven't occurred since then. This transforms the network from having a fixed throughput to being driven by network activity (the bottleneck then becomes how fast 6 miners can be selected and for those miners to crunch the transactions and make a block). So, what does this mean for miners? While this part is above my knowledge, it likely means that CPUs would become dominant again, as they are likely to sit idle most of the time, making ASICs far too power hungry to be profitable. Even GPUs may not make financial sense.

Just a thought.

I did say this, right? <_<

That's it, I give up !! You've made a lot of points and got me all excited that perhaps any common person could realistically invest $4,000 and have a good chance to mine bitcoin and, as you said "have a saying"...Now you said, no you are not a miner, an no you couldn't actually make a profit by only investing $4K.  You Sir, essentially have missed all the points that we have been discussing...thanks for wasting my time !

I'm not a miner and I'm not saying you could actually make a profit by only investing $4k. What I'm saying is that the idea that Bitcoin is controlled by the big miners and that "nobody else" can get into mining, is false. If you have access to cheap electricity and live in a cold climate with cheap, fast Internet, then you should be able to make money mining even with just a single state-of-the-art mining rig (about $4k). There's no inherent advantage to owning 1000 mining rigs over 1 mining rig unless it allows you to broker bulk discounts on electricity or something.

If you're worried about the political aspect of Bitcoin - i.e. the idea of people being able to "have a say" in how the Bitcoin network operates, including tx processing - just run a mining rig and join a mining pool. You might be operating at a loss but if "having a say" is something that matters that much to you, you're free to have a say. It's not even going to cost you $4k since you will recoup at least some of the cost of the mining rig and electricity from mining.

The cost of entry to the mining business is a few thousand dollars. That is hardly "centralization".
[/quote]

Once again I would love be educated and learn on what is the reality of the current bitcoin mining scenario-  what is the ROI of bitcoin mining ?

I have no reason not to believe you. But, base on what I've heard upto now is that mining for Bitcoin is a lost cause,  a private person whose invested,  as you said ~ $4k will no longer earn a decent return, and that buying bitcoins from the exchange is the better way to invest your money...if you are a real life miner, whose actually and currently getting bitcoins from mining, and come out ahead of buying bitcoin from the exchange-  then I am all ears !! I would like to learn how you are pulling it off ??  Please PM me if you are a real deal !

I would love to see the real  cost vs benefits of spending $4k in equipment rather just buying bitcoins ?

It isn't. Cohen recently announced a combined proof-of-space + proof-of-time algorithm that would perform a similar function as Bitcoin's PoW (hashcash). Litecoin uses a different PoW function that acts more "proof-of-space-ish" than hashcash.


Some people seem to think this but they are incorrect and this is certainly not what Satoshi explained the function of the PoW to be in the whitepaper. All that the proof-of-work does is prove that time is passing. That's it. When I look at the block hash for a block, I can see that an immense amount of computation has been expended to generate that block hash and that proves to me that - even given all the computation power available on the Bitcoin network - a non-trivial amount of time (probably close to about 10 minutes, on average) had to pass in order for that block hash to be generated. The network adjusts the difficulty factor for precisely this reason, so that anyone can independently inspect a block hash and come to the conclusion that time has passed while the block was being mined.

The importance of time passing is that, when combined with hash-chaining, it means that the blocks in the blockchain form a kind of non-telescoping time series - at 497254 blocks, about 4,972,540 minutes have passed since the Genesis block (plus/minus a cumulative error margin due to variation in the block mining time). So, I believe that the current unspent transaction output set is a true record of stake within the Bitcoin network because I can verify (independently, at the low cost of checking block hashes) that there has been no funny business since the Genesis block. That is why hashing is performed in order to mine blocks.


The cost of entry to the mining business is a few thousand dollars. That is hardly "centralization".

Wow, a lot of bolded text in this thread... 


51% is theoretical. Each node makes an independent choice of which chain to follow. We expect that full nodes will always follow the chain with longest proof-of-work, among valid chains (invalid chains will be rejected by all nodes). It can happen that two valid blocks are mined almost simultaneously. Rather than trying to figure out "which block was really mined first", the network just waits to see which block will get extended by the mining nodes. So, if A&B appear almost simultaneously, then the network will wait for C to appear - C must either extend A or extend B. This can happen multiple times and the network will handle it just fine, although affected transactions will be in an uncertain status until the chain is fully resolved. This is why large transactions need to wait at least 6 blocks (1 hour) to confirm.


Bitcoin mining is a lottery, a distributed lottery. You get lottery tickets by running mining equipment. The more mining equipment you run and the faster your mining equipment, the more tickets you are scratching. So, miners will build as many machines as is profitable given electricity price versus block reward + tx fees so they can scratch as many lottery tickets as possible.


There is no unfair advantage. You can mine Bitcoins for about $4k - just buy a mining rig and join a mining pool.

You seems to make one point, which perhaps could be true:  but we need concrete evidences to be convinced:

1). Consider the hash rate and its level of difficulty is within a black box:  from the end users standpoint, there are 12.5 bitcoins being produced every 10 minutes - no more, no less.  I cannot fatom or see any clear evidence that the higher hash rate, difficulty would directly correlate to a larger market cap of bitcoin ??

2). I don't believe for one second that more powerful and faster computers is the absolute single solution to have a secured blockchain, which would maintains its scarcity and holding its high value.  IMHO, higher hash rate is unnecessary and a completely waste of time and energy - its sole purpose is merely to give people a delusional
perceptions of some "intrinsic values" built in with the newly mined bitcoins with the higher hashrate and high level of difficulty !!  Which we all know is a complete BS !

3). More expensive equipment  and larger pool of miners do not equate to true technological innovation- let more general population in the task and soon there will be true competitition and innovation emerging...

[/quote] The tradeoff for only mining to be controlled by a minority is that most people can't mine. I don't see anything bad in that. Want to make money? Invest some resources. It doesn't grow on trees.[/quote]. You have jut described a text book definition of Centralization !

I disagree:  what you described is actually an  "unfair competitive advantage" not "competitive".  The more people whose get an opportunity to participate, the more competitive it would become, not less.  If you create a higher barrier to entry for mining, you are not being competitive, you are a monopoly- same as cheating...

Not to be confused between "better technology" vs more capital to purchase large mining farm...
[/quote]
What I wanted to say with decreased competitiveness was that the quality of competition would fall because the new entrants would not be able to bring equal amount of capital. Better technology doesn't gets build up in the air. One has to invest capital to gain certain technology. But what I meant was that making it like lottery system would decrease the motivational incentive as people would become reluctant in becoming new technology because rewards would be based merely on who mines the 51st block.

But if you say that we can normalize difficulty then this would merely bring everyone on mining. And if we imagine a whole crypto world. Everyone would just do mining with their personal computers in hand. There just won't be any other job. By employing everyone on same job you can't say that you are increasing competition to make bitcoin decentralized.

Obviously. Aren't you suggesting that we don't adjust the difficulty of Bitcoin such that it never changes so everyone can have a chance at earning a decent amount of Bitcoin?

I'm talking about market cap. That is the factor that you are influencing. By fixing the difficulty and not changing the block reward, you are essentially increasing the market cap. Even if you're not fixing the difficulty, based on your motivations, you are still increasing the market cap. That is the main issue here.

Of course we want it to be decentralised. So do we want Bitcoin to be stable and secure or would you want an altcoin which everyone can easily obtain and is very unstable and insecure? The tradeoff for only mining to be controlled by a minority is that most people can't mine. I don't see anything bad in that. Want to make money? Invest some resources. It doesn't grow on trees.

The point is, with more resources, you are sure to do better. That's the basics. If you restrict it to CPU mining only, such that most people can mine it, botnet owners would have a great time counting money.

The rate of bitcoin being produced is absolutely fixed - currently it is approximately 12.5 bitcoins can be harvested every 10 minutes.  That is not the debate here !  The question here is how and who get to earn them ?  Do we want a few large conglomerates mining companies to control the mining or the larger population whose could get a shot at earning the Bitcoins ??

Anyone can mine, its just who would profit more. Mining isn't a way to get easy money. Think about it, the purpose of proof of work is to distribute coin with the concept of it being difficult in mind. If you have more resources, you would obviously be able to get more stuff. In Bitcoin, the competitiveness of mining is with who has more hashrate and not how many people are able to mine. We don't need it to competitive either.

Okay, lets put all that aside. If you were to let everyone generate Bitcoins, how do you make Bitcoin so scarce? It would simply defeat the purpose of having a fixed market cap and is essentially just your traditional fiat isn't it?

But it would decrease the amount of competitiveness in mining. More number of miners will enter the market. Infact everyone would just leave everything and mine because its a "chance" that they might find some bitcoin out of this task with no increased efforts in technology. Along with making bitcoin decentralize it will eliminate its whole purpose to be used as currency.
[/quote]

I disagree:  what you described is actually an  "unfair competitive advantage" not "competitive".  The more people whose get an opportunity to participate, the more competitive it would become, not less.  If you create a higher barrier to entry for mining, you are not being competitive, you are a monopoly- same as cheating...

Not to be confused between "better technology" vs more capital to purchase large mining farm...

See to maintain an equilibrium between the swiftness of transactions and limited supply of bitcoin this delay of 10 minutes was set. If there would have been no delay time miners could have even found hundreds of blocks within seconds using the current amount of technology. Moreover the problem of blocks with quite less or even zero number of transactions would also increase. Such blocks would just add some wasteful load over the network.
Ofcourse its possible but have you ever heard about reversal of transactions? Any bitcoin transaction processed can be manipulated and reversed by someone with good amount of computing power and knowledge. More amount of confirmations make sure that the block becomes almost immovable thus no way to reverse the transactions. Generally 6 confirmations are considered quite good.
Yes, we could but the problem would be the same you will see more amount of blocks with lesser transactions getting confirmed things are not going to change because ultimately one block would contain lesser number of transactions which need to be in same number of blocks to get all confirmations.
But it would decrease the amount of competitiveness in mining. More number of miners will enter the market. Infact everyone would just leave everything and mine because its a "chance" that they might find some bitcoin out of this task with no increased efforts in technology. Along with making bitcoin decentralize it will eliminate its whole purpose to be used as currency.

Why would it be? It's there also to ensure that the supply of Bitcoins would be evenly distributed.
I believe that Satoshi chose this specific amount of time so that there would be lesser number of orphans blocks. If the intervals of the blocks gets too fast, then there is a higher chance with two or more miner generating a block at the same block height. This would pose as a risk for merchants, I'll explain more below.

In theory, you don't need any, if you have no trust issue. Confirmation is just a way to imprint transactions into the Blockchain. Once its included in a block, it is inside the Blockchain and you need immense power to reverse it. There's no such thing as 51% of confirmation.

Anyway, just to elaborate on the point I made before this quote. Imagine that there's two forks at the same block height of 15. One of the blocks has transaction A inside it and the other doesn't. If the difficulty of producing blocks is low, then the fork could potentially grow. If at any point, either of the fork overtakes the other, the slower chain would be orphaned. If transaction A was included in the orphaned chain, it would be back to unconfirmed and anyone can double spend it. With a longer interval, this would have a lesser chance of happening.

Of course, of course. First of all, we are trading something for Bitcoin and in this case, miners are giving up their electricity and investments to try to earn Bitcoins. If everyone were to be able to generate the same amount of Bitcoin as before, there would be zero point of mining. If I can generate 1 coin at 1GH/s my whole life, Bitcoin wouldn't have the value it has today, nothing near it.

Refer to point 2 and 1. If you're having better hardware, you should be receiving more proportionately. Doesn't make sense for anyone to develop miners if you don't get more for having faster miners.
Honestly, I really don't get what is a 51% node. It doesn't make sense at all.

---

---

Given that you have 2 forks A & B. If you mine a block on fork A such that it becomes longer than fork B, you will get the reward and the other chain is orphaned, vice versa.

I don't see any reason to make mining a lottery game. Mining should always be based on the amount of power a miner has. If you don't have sufficient amount of money or land, don't mine Bitcoins.

---

---

Of course. We are using a "currency", not some game credits. If you have more power, of course you have a higher chance. The mining process is totally dependent on how much hashpower you have or how many hashes can you try.

Isn't it well known that you would get better rates by ordering a bulk of stuff? If you want to have the same advantage as them, get a huge warehouse, loads of electricity and loads of ASICs.
You can still mine Bitcoins, why not? Just get an ASIC.

If there is a higher hashrate overall, the difficulty of anyone executing a 51% attack is harder. I don't see anything bad with helping to secure the network even if it means I can't get free Bitcoins.

Of course you can. Mining is basically a lottery anyway, better equipment just lets you buy more tickets.
[/quote]

I wish better equipment is just simply buying more tickets - but we all know there's more to it...they essentially force all individual miners out of business - they change the way the lottery being drawn, they have the power to (almost successfully) changing the lottery rules of engagement...I don't think this is just a simple case of buying more tickets in hoping to get a better change of winning at the present time, but to influent the future winning.  Specifically in favor for one group of people vs the rest of the population.  We could call it what ever we'd like, but in reality, it is just flat out monopoly !

I also know enough to embrace the idea of competition and reward to advance technology and serve the common interests.  But competition should not impede progress, as some of us whose have been around long enough to see the effect of VHS vs Beta format or Windows vs Linus...and having to cough up to $300 for a marginal operating software for your PC.

You can act as a node in the network, checking for added blocks in the blockchain sequences.