The War Over Hash Rate

Anyone paying attention to block times for both bitcoin and bitcoin cash in the last week might have noticed some very strange occurrences going on. Due to both bitcoin cash and bitcoin having the same mining algorithm , some miners are switching back and forth between difficulty retargets and adding volatility to each chain. While the main bitcoin chain seems to only really be slowed down from time to time, the bitcoin cash chain is seeing periods of no blocks for hours and then blocks occurring at a very fast pace.

With sites like fork.lol you can see which chain is actually more profitable to mine on and because difficulty doesn’t change automatically, it creates an opportunity for miners to make a large amount of money very quickly. While some miners are choosing not to switch out of ideology, some are switching between the two chains which is actually very bad for both. The way that difficulty retargets is about every 1600 blocks or ideally every 11 days or so.

Bitcoin cash saw this as a problem because they knew when they forked they weren’t going to be able to get blocks at the same time and because it would literally take months if they kept the same difficulty algorithm, they altered it a bit. The way it works on bitcoin cash is that if a at least 6 blocks aren’t found in 12 hours, it will reduce the difficulty down a bit. However in reality what is happening now because of the high bitcoin cash price is miners are pumping up the difficulty, and leaving back to the main chain and returning when it retargets.

At the time of the retarget, profitability for mining bitcoin cash shoots up so they return, make a ton of money, dump the coins and reset when the 1600 blocks are mined again. This doesn’t happen in 11 days though, it happens in only a few or less. This means the bitcoin cash chain is being drained of the coins at a much faster inflation rate and they are headed for a halving much quicker. One or two times of this happening you wont see a real effect, but over time it is very obvious the chain is really unusable and unpredictable.

The main bitcoin chain isn’t really having a good time either with slower block speeds, they are having trouble moving at the average 10 minute block target. Because of this the mempool is slowly clogging up and transactions are becoming more expensive. Many believe this is an attack by miners and personally I agree. They are the only ones really profiting greatly and are getting the money in increased fees and also the BCH they mine. There is even a possibility that they aren’t dumping the BCH so they can game the system for longer. Curious to see what continue to go in between the two chains and if one chain opts to change their difficulty retargeting time.

Thanks to @Elyaque for the badges