So when the change was made from KGW to DGW3 (around block 124000) we start seeing clever solve REALLY low difficulty blocks.. because as you point out, DGW3 makes very extreme changes to the difficulty.
Here is where I kind of disagree and am hoping others can step in and shed some light.
In my opinion, the algorithm should have nothing to do with profitability. The market will determine that.
Notice how the MAX difficulty of the blocks clever solves is tightly correlated to the bittrex NLG price? That is no coincidence. The super-low difficulty blocks are just a bonus. The miners are the ones who should be worried about profitability, not the algorithm.. Assuming the new algorithm allows dedicated miners to get their fair share of the rewards (right now clever is robbing them, so they go elsewhere) I would expect miners to come back to NLG. In a fair market (no massive jump pools influences), demand drives price, price drives mining hashrate. IE: If there is demand for the NLG, the price goes up and this will attract new miners to NLG.. thus the hashrate goes up as those miners compete for the coins to sell.
I'll try to create another chart soon through december 1.. maybe this time with clever solved blocks as blue, everyone else's solved blocks as orange. I expect to see 2 things. Orange on average will be higher than blue.. and bioMike's efforts over the past month will drastically reduce the difference between the highs and the lows. If we then add a secondary axis charting a block gap moving average, we should see the strong correlation you describe between a tighter difficulty range and lower block gaps.
Sorry for the long-winded post. I think I've gotten a little carried away
--Mark
Markanth, great post, mate.
I just wanted to clarify something in terms of the bolded sentances above.
With regards to clever, the algo change is specifically about profit. We need to limit the period of mining profitability and we need to do it faster than we currently do. It is a profits game for them, so we need to take that away from them.
I like your graphs, but I'm not sure if you're looking at them correctly. The correlation between difficulty and price might be getting skewed, if I'm reading your post correctly. Correct me if I'm wrong(it's 4am and the baby is fussy). The reason you're seeing a direct correlation is because clever is causing it. Clever isn't a traditional miner that stores their coins and spends a little here and there. They instadump their coins for BTC/LTC. I'd suspect you'd see a trailing correlation if you took a closer look. Clever mines a super low series of blocks, and then the price drops shortly after. Price isn't driving difficulty in our case right now, but rather difficulty driving price. Clever mines easy blocks, clever sells easy blocks. If it wasn't for the dedicated miners propping up the nethash, clever would probably own the whole chain and the price would be much lower than it is now. You are 100% correct though that in a free market environment, price would drive difficulty via more dedicated miners. We just aren't in a free market right now.
I would suspect you are correct with the orange/blue observation. The bottom of that graph would be very blue. If you have the time, please chart it. Anyone else could as well. You just need two data sets, one for clever's blocks, and one for everyone else.
-Fuse
