Can a big dump render Bitcoin unusable because of the mining difficulty?

[p_a_l_o_f]

Hi, I have this theoretical question.

What is a probability or feasibility of this scenario - Imagine that somehow dumps a large enough amount of BTC, so the BTC price goes 90-95% down *before* the next mining difficulty adjustment happens. Because of the price dump many miners will turn off their machines - still before the next difficulty adjustment, so the mining process slows down greatly, so let's say 1 block per day - which could take the price down even further, causing massive panic, etc...which could result either in BTC nuclear winter or the whole crypto nuclear winter or BTC being replaced by something else?

What are the competent opinions on this? I believe this question probably has already been discussed, so apologize for that, I just could not find anywhere :/

A follow up question would be - why is the mining difficulty adjusted after each 2016 blocks? Wouldn't it be better to adjust it like - 2016 blocks or two weeks, whichever comes earlier? Would not this make the whole network more robust against such possible attacks?

Thanks!

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[sidehack]

Being robust against that attack is less of a concern than against other types of attacks. You'd need a massive cartel of people heavily invested in BTC in order to collect enough coin to drop the price that far, and it's likely that, in an economy driven largely by greed, you wouldn't be able to find that many big players interested in getting such a lousy return on prior investments of capital or mining efforts.

Dropping to 1 block per day would mean a 99.3% drop in global hashrate. Diff tends to follow price, but when prices drop diff drops at most half as far, probably on account of all the industrial low-cost-power miners who can ride out drops better than home users and poor planners. If a 95% drop in price were to happen, the short-term effect should only be a roughly 50% reduction in hashrate, for 72-block days, at least for a time. Even the big industrial miners would have to operate out of pocket while hoping for coins to rebound. If the price didn't come back up soon, then we could have trouble, but it wouldn't land all at once.

The guys who bought in that massive dump at low prices will also be hoping for coins to rebound, and possibly wrangling their own cartels of manipulators to pull off some token large buys in order to swing the price upward.

In the meantime, Bitmain might use the opening to push one of their crappy forks, so it's possible an alternative would gain a bit of traction, but most of the alternative options have the same susceptibilities.

[mikeywith]

If BTC price dips that much in such a short period of time, it will be unusable for that exact same reason, not because of mining or anything else, every bear market that bitcoin had took months to actually hit 85% drop max , it took 400 days in 2013-2014 and 363 days in 2018 only to hit an average of 85% drop, and then it takes months or sometimes even years before people start trusting bitcoin again, some actually leave for good and never come back.

but with all honesty if bitcoin falls to 750$  tomorrow or even in a course of say 2-3 months (90% drop from where we at right now) , it's very likely that bitcoin will be considered unusable by most investors out there, and there will be no buyers to lift price back up.

with that being said, I see no reason why does 2016 blocks adjustment can't be changed, newer difficulty adjustments algorithms have been implemented and tested on other coins, they might work just fine on bitcoin , but this is no where near top priority now, scaling layer 2 seems to be the only thing that matters now, and when the time comes , i do expect a tweak in the difficulty adjustment protocol.

[Philipma1957cellphone]

   So if btc adds an emergency adjustment in case of 90% hashrate drop causing a 100 day wait for new adjustment. Problem is solved.  So dropping hashrate due to a huge price drop could be fixed. I don't worry that will happen until 2024 1/2 ing.   Could happen then.

[Steamtyme]

People and businesses don't react that quickly, for this to be any sort of a catastrophic even it would need to crash at the beginning of an adjustment period. Even then a large portion of the Global hashrate is split between a few companies and businesses with a large vested interest in BTC carrying on through any hiccup.
If it runs slower for 8 days and comes out successful it can be claimed as a win for weathering the storm. Could someone try and push a Fork that's running or a new one at that time definitely but that would be a massive disruption far worse than a large drop in hashrate. If people where concerned about this they would likely have looked into the DGW adjustments that a lot of small cap coins move to when they get hit with a hashrate pump and dump.
Back to the large companies that are heavily vested in Bitcoin, they would do anything and everything to keep the system plugging along as fast as they could at that time. Allowing it to just crawl and build FUD would only hurt them in the end. Unless some really large bag holders get into a pissing match and want to watch the world burn, I think their self preservation of wealth will keep price and the network robust.

[sidehack]

Unless some really large bag holders get into a pissing match and want to watch the world burn

Though admittedly if they did it wouldn't be the first time. I'm still working on recovering from the sales and savings hit from last year's dick-swinging contest price dive.

[philipma1957]

Yeah if I recall  BCH has emergency diff adjustment

and BTC does not.  Sooo  if you crashed price and Diff   on both BCH and BTC   BCH could make the emergency adjustment  and BTC  can't

We witnessed bitmain try this in spring of 2018  maybe the moron Wu will try it again.  Have to wait and see.

[taserz]

I think he is still made about BCH. But yeah it will take btc a solid amount of time to re adjust diff if a massive change and it sucks since we just got to ride it out.

[stompix]

First, a 95% drop in price overnight would a catastrophe of its own, it's already a doomsday scenario so wondering about the hashrate is like being concerned you let the door unlocked after a nuclear bomb got dropped on your town.

But I think the miners quitting and delivering another serious blow to bitcoin won't be happening. All are invested in bitcoin or if not directly they make a living out of this and abandoning it exactly at this point means throwing the gear in the dumpster as it's going to be worthless and watching their wallets turn into useless bits of data.

Knowing that keeping your gear only for another day would cost you a few hundred dollars and turn off entirely means you're going to lose everything, what do you think miners will choose?! Yeah, some will quit, some will still make a profit since they have the gear paid and they have the electric power already paid in a contract even if they use it or not, some use solar or wind power which would simply be burned away since they can't sell it to anyone and so on and on. And a few will take the hit for a few days just to not lose everything and so on. An instant drop in the hash rate to 3-5%? Nope, not going to happen!

We witnessed bitmain try this in spring of 2018  maybe the moron Wu will try it again.  Have to wait and see.

Maybe they keep quite deliberately or it's just the silence before the storm but my opinion is that they put any plans of a takeover on pause. Another price drop might be really catastrophic for them and more and more people are involved in bitmain, it's no longer a business that will act just on the will of one guy. Or at least I wish to think it's so!

And since we're one the catastrophic scenarios debate. What would a complete blackout in China do to the block time?

[judypug1956]

I for one would love to find out just how much gear is in China mining.  Has to be over 33% of the network.

I some USA and some Canada mines that add to over 15% of the network. So I guess more then 33% maybe as much as 66% of the hash is in China.

[Steamtyme]

Though admittedly if they did it wouldn't be the first time. I'm still working on recovering from the sales and savings hit from last year's dick-swinging contest price dive.

Yeah that was a shit show, but more like a testicle wave and a tantrum. While it F'd things up confused people and was just a ridiculous end to a 1 year partnership before the true visions began to differ. I'm thinking people without any self interest involved flat out dumping on the market. There are large amounts of concentrated coins out there, luckily most people who have wealth want to retain and grow it.

We witnessed bitmain try this in spring of 2018  maybe the moron Wu will try it again.  Have to wait and see.

Some people do continue to try the same tactics over and over. I don't bother but is he still all in on BCH? Would be hilarious to be in a boardroom with him walking back in leading out with, "So I want to circle back to BCH and really sell it this time"

I for one would love to find out just how much gear is in China mining.  Has to be over 33% of the network.

I some USA and some Canada mines that add to over 15% of the network. So I guess more then 33% maybe as much as 66% of the hash is in China.

That would be interesting to find out. Ideally not when I'm trying to send out coins. I was always confused by the fact that we still only average global hashrate based on block solve times. I just assumed there was a way to track hashrate more specifically to at least attempt to pinpoint where it's actually distributed. I guess we can wait for the Chinese government to launch it's own SHA-256 coin and "convince" the people to mine it.

[d5000]

An aspect which hasn't been brought out in this thread but I consider important to answer the question are miners' expectations.

If the price dump is only caused by speculation (particularly, it seems it could be profitable for a very big cartel of short sellers) then Bitcoin's future outlook does not really change, and so miners can expect a return to higher values relatively fast. Those with a little bit of savings wouldn't turn off their machines.

But if there is a real fundamental problem associated with the dump, which endarkens Bitcoin's success expectations - an important bug, an altcoin having taken the leadership (not like BCH or ETH in 2017), or prohibitions in several important countries - then miners can't expect to get back to the previous values, at least not fastly. So a big part of them could try to get out, and block time could go down to problematic levels.

There's another aspect which makes a success of such an attack unlikely. If block times are getting bigger, then probably transaction fees will increase sharply because many will panic and try to move their coins to an exchange at all cost, and all other urgent transactions will need high fees to become processed in a forseeable time. So actually the few blocks found in this low price period could be - measured in BTC - the most profitable of all because of the generous fees, and if there is the slightest expectation that the price could return to a level it had before, some miners will try to get them.

Also, in the time with low block rate, there are also less newly mined coins on the sell side of the market, which could also help the price to recover fast.

Overall, I think Bitcoin has a robust incentive structure to prevent such an attack, and thus its almost impossible to "destroy" the currency with it (or even to provoke a hard fork).

[philipma1957]

Biggest danger if I were to guess would be for governments to make owning a miner a crime.  They could let you buy a coin hold a coin trade a coin, but not mine one.

Only a handful of countries keep actual mining legal. This  would stop a lot of hashrate. i for one would not mine anymore if this was done.

[d5000]

But that would not be something that would happen overnight. Laws, above all in democratic countries, are often a result of a long period of struggle. It's likely that the difficulty readjustment period would be short enough to let the diff react to that situation. And also it's unlikely that all countries would forbid mining at the same time. Authoritarian ones would be typically faster.

[philipma1957]

But that would not be something that would happen overnight. Laws, above all in democratic countries, are often a result of a long period of struggle. It's likely that the difficulty readjustment period would be short enough to let the diff react to that situation. And also it's unlikely that all countries would forbid mining at the same time. Authoritarian ones would be typically faster.

well a lot depends on how many miners are in China 🇨🇳 and mining ⛏.

If China has 30% of the worlds gear inside China mining ⛏ as I type you may be correct.

But if 75% of the World 🌎 gear is in China 🇨🇳 it would be an issue.

China would be the obvious country for this to happen.

[d5000]

Currently it seems that it's 65 %. That means, that if China's miners all were turned off the same day, we had block times of ~30 minutes, and difficulty readjustment at worst would take around 45-50 days if the prohibition just came out at the start of a diff readjustment period.

I still think that would not be too problematic because of the effects I mentioned: if there are less blocks, transaction fees will rise, which will lead to more hashrate in countries where it's allowed. I can also imagine that the mining hardware of China's farms would lead to a drop in prices on the used hardware market, and new miners with less hardware adquisiton costs would emerge, which would immediately begin to mine to profit from this situation. Farm operators could also transfer their installations into other countries. Can't imagine that Bitmain and other big mining operators don't have an "emergency plan" if this was to occur.

It could get complicated if this occured and simultaneously a large dump happened (speculators could try to profit from that situation, and shorting would be the obvious way to do that). In this case, however, if I was the Core devs, I would simply deploy a client with an emergency difficulty readjustment, like BCH did.