Transaction

j"1LAnZuoQdcKCkpDBKQMCgziGMoPC4VQUckM <div class="post"><div class="quoteheader"><a href="https://bitcointalk.org/index.php?topic=813.msg9195#msg9195">Quote from: NewLibertyStandard on August 14, 2010, 02:01:24 PM</a></div><div class="quote">I think there is a limit to the amount that the difficulty can increase at each step.<br/><br/>The more the bitcoin network grows, the less likely it is to have large spikes in difficulty. The likelihood of a jump of that magnitude from a single entity is very unlikely. If that kind of jump does occur, it will more likely be from a large interested demographic discovering Bitcoin all at once, such as if it was featured in a major magazine. Bitcoin will cope with such increases and subsequent decreases just fine.<br/></div><br/>There is a limit to the difficulty adjustment, but for upward adjustments it is 300% (factor of 4 between new and old) rather than the 20% in my scenario, so it wouldn't help.&nbsp; <br/><br/>I would argue that a 20% difficulty adjustment is in no sense extreme - the last five adjustments were 44%, 35%, 300%, 93%, and 21%.&nbsp; This hasn't been a problem up to now, but obviously not because a 20% adjustment would be too extreme, but more likely because it hasn't been enough to make minting unprofitable (or otherwise uninteresting).&nbsp; My scenario does not assume that a single entity is responsible for a jump in difficulty - it is just as problematic if e.g. publicity makes minting 20% more popular at a time when the profit margin is less than 20%.&nbsp; The extreme effects come from the proportion of minters who are unwilling to continue minting at a loss.&nbsp; If this proportion is large while the profit margin is low, the system becomes very unstable.<br/><br/>Also, if I am right about the 4-year halving of bitcoins generated (i.e. that it <i>doesn't</i> affect the difficulty adjustment) such events alone would be equivalent to a 100% upward difficulty adjustment.&nbsp; And it seems very reasonable to assume that most minters will have a lower profit margin than 100% in the future.<br/></div> text/html