[NEWB] Block difficulty control system?

[thethingis]

Reading tons, absorbing lots, and learning gradually...

Question: has anyone considered implementing the difficulty increase as a feedback control system?

I understand block discovery is targeted for 10 minutes on average. I also understand we're seeing 8-9 minutes block time due to increasing global hash rate, putting us ahead of schedule on minting. Adding some kind of integral term or higher-order model control might be better suited to keeping it near 10 minutes.

e.g. modelling mining as a 1st order plant with desired block rate as the input, an integral term on the discovery rate error (i.e. difference between average block time and 10 minutes) might serve to drive it closer to 10 minutes. In fact this would suffice to drive the error to zero given a linear climb in hash rate, though an exponential rise would still see some steady state error, possibly unbounded.

Note: I'm not sure whether it's already using feedback like this, or whether we even care about keeping the schedule - more reading required for me.

PS: we may be seeing too-rapid inflation if the amount of money being produced is not actually required at this time by the surrounding Bitcoin economy. Can someone point me to discussion of how things are going in that sense, and whether anything could or should be done to correct it?

Cheers

[R0yalAir]

mining becomes too expensive to be profitable

[thethingis]

New capacity is flying into the network now due to it being the next hot get-rich-quick thing, but could it equilibrate out to some commodity cost just above risk-free investment? Maybe bitcoin price rises with mining cost in USD? Once miners have lost money for a while I would expect the hash-rate growth to slow or even go negative. Wonder if that would result in a drop in BTC value vs. USD.

[cdesjard09]

I think that's the idea behind the difficulty. As global hashrate increases, the difficulty increases and the profitability of mining BTC begins to decrease because you need more hashrate to earn the same amount of BTC. This obviously costs USD in both mining hardware and power consumption. At some point it becomes unprofitable and miners shut off, and the difficulty drops again. There's really no evidence to suggest that miners shutting down would affect the price of Bitcoin negatively (assuming there are suffiicient miners to continue finding blocks), nor has the price of BTC really been correlated with the global hashrate, as far as I know (I can't back this up with any data atm).

[deepceleron]

The difficulty is recalculated every 2016 blocks - every 2 weeks if mining is constant and returns the expected six blocks an hour (edit, fixed stoopidity).

This causes inconvenience when the hashrate drastically drops, as happened to Namecoin about two years ago when 90% of the miners quit after mining the heck out of it while it was profitable. Other formulas could be more adaptive, such as reducing the time between adjustments, or readjusting every block based on a similar look-back, but Bitcoin itself is not likely to change.

[cdesjard09]

Valid point, the adjustment time could be a cause for concern, but considering how high the difficulty is currently its hard to imagine a similar scenario for BTC that isn't spurred by an event other than mining, most likely an extremely drastic crash to near zero before 90% of the miners leave the scene. And if something like that happens, well its hard to see a future for BTC regardless of how many miners leave before the difficulty changes.