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Author Topic: Isn't increasing difficulty a good sign ?  (Read 1951 times)
grondilu
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November 22, 2010, 03:19:20 PM
 #1

I mean : the higher the difficulty gets, the more people are using bitcoins, right ?

I know that it may also be seen as a result of the increase of computing power of commercial machines, but I doubt it is that significant.

So :  can I consider the difficulty as a good indicator of bitcoin's popularity ?
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November 22, 2010, 03:40:57 PM
 #2

So :  can I consider the difficulty as a good indicator of bitcoin's popularity ?

Not necessarily.
The difficulty only shows the total computing power of the network, which is rising fast. However, that may mean that only small number of tech savvy people is running more and more clusters & gpu miners...

However I wouldn't treat difficulty as a good factor for measuring bitcoin popularity in general public.

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November 22, 2010, 03:46:48 PM
 #3

The switch from CPU to GPU mining accounts for most of the recent difficulty increases.

In general, increasing difficulty is bad news for anyone generating for profit, and good news for everyone else.
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November 22, 2010, 04:11:02 PM
 #4

It's good news for everyone, it just means it gets harder and harder to attack the network.

People expecting easy free money are fools anyway =)

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November 22, 2010, 04:15:42 PM
 #5

One way to look at increasing difficulty is that the total sum of CPU power being devoted to Bitcoins is also increasing.  This is an excellent thing so far as it demonstrates that it is all that much harder for some small group or a single individual to "take over" the network in some malicious attack, so in that regard increasing difficulty is very much a good thing.

Another metric that can be used in terms of at least an approximate gauge of overall Bitcoins popularity is to calculate the number of coins being transferred in transactions.  I'm not sure if mtgox is keeping track of this, but it would be an interesting statistic to pull up, and the details about the coins being processed is in the block chain so historical information for the whole history of Bitcoins is available.

I'd like to do some statistical analysis of the chain myself.... let's see what is going on that way.

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November 22, 2010, 04:30:56 PM
 #6

Is it an excellent thing?  What if the CPU power responsible for raising the difficulty came from 1 miner?  Wouldn't that person have by definition succeeded in taking over the network?
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November 22, 2010, 04:33:28 PM
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Is it an excellent thing?  What if the CPU power responsible for raising the difficulty came from 1 miner?  Wouldn't that person have by definition succeeded in taking over the network?

It seems higly unlikely.
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November 22, 2010, 04:35:43 PM
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What if the CPU power responsible for raising the difficulty came from 1 miner?

For that reason it's good to raise the difficulty before that person comes along.
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November 22, 2010, 04:59:56 PM
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highly unlikely for 1 generator, but i could imagine a scenario where only 20 people are responsible for 95% of the difficulty.  that seems like a shaky foundation. 
grondilu
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November 22, 2010, 05:08:48 PM
 #10

highly unlikely for 1 generator, but i could imagine a scenario where only 20 people are responsible for 95% of the difficulty.  that seems like a shaky foundation. 

Well, I wouldn't mind.   Those people would just have a fair reward for their contribution to bitcoin security.  It would be fine with me.
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November 22, 2010, 07:13:41 PM
 #11

highly unlikely for 1 generator, but i could imagine a scenario where only 20 people are responsible for 95% of the difficulty.  that seems like a shaky foundation. 

Well, I wouldn't mind.   Those people would just have a fair reward for their contribution to bitcoin security.  It would be fine with me.


That would also mean that 20 people own 95% of all bitcoins ... I do not think that would be so fine ... and what's worse it may be actually happening - the deciding factor then is, what are those 20 people going to do with their bitcoins.
grondilu
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November 22, 2010, 07:23:12 PM
 #12

That would also mean that 20 people own 95% of all bitcoins ... I do not think that would be so fine ... and what's worse it may be actually happening - the deciding factor then is, what are those 20 people going to do with their bitcoins.

There would be no point for them in generating bitcoins if they don't sell them at some point.  And if they don't, that gives even more value to the remaining, circulating bitcoins.

I really don't care if bitcoins are generated by a few people.  As long as this generation has a quantitative limit, it doesn't really matter.  At some point they will have to abandon their bitcoins if they want to benefit from it.  That's the good thing with fixed aggregate money.


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November 22, 2010, 07:24:53 PM
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That would also mean that 20 people own 95% of all bitcoins ... I do not think that would be so fine ... and what's worse it may be actually happening - the deciding factor then is, what are those 20 people going to do with their bitcoins.

It's not at all relevant what they might intend to do with their bitcoins.  If that concerns you, you can either avoid Bitcoin, or start your own generating cluster to compete with them.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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November 22, 2010, 07:56:54 PM
 #14

That would also mean that 20 people own 95% of all bitcoins ... I do not think that would be so fine ... and what's worse it may be actually happening - the deciding factor then is, what are those 20 people going to do with their bitcoins.

It's not at all relevant what they might intend to do with their bitcoins.  If that concerns you, you can either avoid Bitcoin, or start your own generating cluster to compete with them.

The other thing to consider is if you start to create your own chain in some sort of presumption that the "rules" aren't "fair" with Bitcoins, that new network is potentially going to be incredibly vulnerable to potential attack by not just this dominating group of CPU processors, but also by any other group that may be lurking.

More seriously, the way to fight people who are "hogging" all of the mining is to simply throw more CPUs at the issue.  That helps make the network all that more secure from outside attacks.

I'd also like to put it this way: If some group is getting 95% of all bitcoins because they are throwing huge amount of CPU resources at generating blocks, they also deserve to get them because they are spending real-world money trying to get all of those blocks.  I would beg of somebody to demonstrate that the coins they are currently earning through mining activity is even doing something like paying for the electrical costs of running Bitcoins, much less paying for the computer equipment at the moment.  Perhaps that may be true in the future, particularly if transaction fees become a big deal, but I don't see anybody really "making money" in terms of mining bitcoins at the moment, at least through mining activity.  There have been some early adopters who are doing pretty well, but that would be true regardless of the mining rate.

The question that you can ask:  Are those who are contributing CPU bandwidth following the rules and generally trying to include transactions into their blocks?

In terms of "fairness" of who gets what for bitcoins, it has been debated extensively in these threads:

http://bitcointalk.org/index.php?topic=1764.0 (Rethinking Bitcoins)
http://bitcointalk.org/index.php?topic=1688.0 (Removing Mining from Bitcoins)

I'm sure there are many other thread about "fairness", and if you know of some feel free to reference them too.

It would be nice if Bitcoins was "fair" in terms of allocating roughly the same Bitcoins to all active participants, but how would you determine that?  In terms of mining the bitcoins themselves, I can't think of a better system than simply using CPU bandwidth as the deciding factor for mining the coins.  Some system needs to be used, and in this case it is verifiable so far as how often you get new coins that are generated as opposed to "earned" through some service or good that you provide to other Bitcoin users.  It would be nice if you got paid for network bandwidth and perhaps a few other metrics, but CPU bandwidth is currently the best and at the moment way to engage in the initial distribution of the coins.

The presumption here is that a majority of the people (and by logic most of the CPU bandwidth) are pretty decent an honorable people, even if there are a few "bad apples" who like to spoil it for the rest of us.  As more people become aware of Bitcoins, the hope is that they are also going to be donating CPU bandwidth to help out the whole network.  All you have to do is get a few blocks in, say once a month or less often than even that.  Doing so will in a small way increase the difficulty and make it all that much harder to hijack the network.

Regardless of the currency, there will be some people who have more than others.  Live with it.  Perhaps they are lucky, smarter, or have better experience and circumstances to take advantage of opportunities presented.  All of that and more plays into personal economics and your ability to get money.

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November 22, 2010, 08:02:43 PM
 #15

highly unlikely for 1 generator, but i could imagine a scenario where only 20 people are responsible for 95% of the difficulty.  that seems like a shaky foundation. 

Well, I wouldn't mind.   Those people would just have a fair reward for their contribution to bitcoin security.  It would be fine with me.


That would also mean that 20 people own 95% of all bitcoins...


Unless they used them... which would be most of the point of having them.

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mpkomara
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November 22, 2010, 11:01:26 PM
 #16

the point isn't about fairness but about stability of the network.  if 20 people are responsible for 95% of the network, then they own the network, and that's not stable. 
MoonShadow
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November 22, 2010, 11:47:00 PM
 #17

the point isn't about fairness but about stability of the network.  if 20 people are responsible for 95% of the network, then they own the network, and that's not stable. 

Maybe, but those 20 people might find it difficult to collude even if they knew who each other were.  These 20 people are in competition to catch those coins, after all.  If 20 people dominate 95% of generation (a strawman argument in the making, if I have ever seen one) then the mean generation for each is less than 5% of total generation.  Not exactly a threat to the system.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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November 23, 2010, 12:40:32 AM
 #18

the point isn't about fairness but about stability of the network.  if 20 people are responsible for 95% of the network, then they own the network, and that's not stable. 

Maybe, but those 20 people might find it difficult to collude even if they knew who each other were.  These 20 people are in competition to catch those coins, after all.  If 20 people dominate 95% of generation (a strawman argument in the making, if I have ever seen one) then the mean generation for each is less than 5% of total generation.  Not exactly a threat to the system.

It doesn't matter if the 20 are brothers, as soon as they collude prices will invite new players. And you don't need their permission, gov permits, licences, etc. You just do it.

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grondilu
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November 23, 2010, 05:31:04 AM
 #19

It doesn't matter if the 20 are brothers, as soon as they collude prices will invite new players. And you don't need their permission, gov permits, licences, etc. You just do it.

Very true.  The point is indeed that such a monopoly would not be enforced in any way.  Nothing prevents you from competing for hash generation.  Basically all you need is a powerful machine, an internet connection, and a little motivation.
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