miners Archives

Recently some Bitcoin core programmers suggested a move that could lead to changing Bitcoin Proof of Work algorithm. This suggestion has met a wild argument among the Bitcoin community where others are discarding it as not necessary.

It is obvious that the Bitcoin Community is not having the best time in 2017. These can be deduced from the anger some users and miners expressed in Major Bitcoin Forum like Bitcointalk.org. It is rightly so because scaling problem is not for one man, but the whole Bitcoin community. Some controversial scaling measures have been proposed including the impending of Hard Fork. However, the latest and may be the most controversial measure is the change of PoW. The programmers who suggested this approach have a strong belief that this is the long awaited solution to Bitcoin scaling issue. The team who believes that a change in the Bitcoin proof of work is the way to go for Bitcoin recently established a website where they can systematically showcase their idea and try to win the favors of the majority.

How does the bitcoin PoW (Proof of Work) operate?

The original developers of Bitcoin saw it fit to decentralize it as much as possible. Bitcoin proof of work is the number calculations and operations that have to be made by nodes in order to reach the required consensus when making changes to the Bitcoin network. This has made Bitcoin unique because a single person cannot make significant changes to it.

What are the reactions of the Bitcoin community in regards to the approach?

The Idea to change the codes for the working methodology of Bitcoin has not been received well by the community. There are those who believe that changing the Bitcoin proof of work will violate the very existence of Bitcoin. They further argue that the people who wrote the codes knew very well which brick those codes represent in the “bitcoin house”.

Why change the proof of work?

The group of programmers has stood their ground in the argument. They claim that if the proof of work codes are changed, it will remove the mushrooming “gang” of miners which are preventing the network to scale. They say that the most miners are so self-centered that they can even mine empty blocks. They do not bother about how congested the network might become.

The supply cap on Bitcoin is what makes its journey a fascinating one to follow. The speculation surrounding its adoption always contributes to the volatility. But to make sure that we are mindful of the fact that the supply is limited, comes once in every four years the concept of halving the reward for every mined block. This reward, initially set to 50 BTC, fell to 25 BTC in late 2012 and to 12.5 BTC in the last month. While this is expected to affect the prices positively, let’s look into other factors that would be affected:

Effect on the miners:

What keeps the Bitcoin network running is the group of miners who are incentivized for processing the transaction. Currently the incentive is bitcoins released per completion of each block. Since this would reduce, the price has to double else the miners’ earnings would be reduced. This would result in miners leaving the network and leave the control of the network in hands of few. This would centralize the control and put it under the risk of an attack. One major concern is that the miner income has changed drastically. It went from 70 bitcoins a week a year ago to less than 20 a week now.

Probable usability issues:

Whenever there was a reward halving, there was a sharp increase in price and increase in transactional volume. If most miners decide to leave the network and the transactional volume goes up, then the network might become slow. But more transactions means better adoption and this is positive for the currency. Hence this would be an incentive for tech firms to come up with alternative solutions to boost the hash rate of the network.

How would halving effect the price:

When this last happened in 2012, there was a significance boost in the prices and proved out to be a good investment. While the price is expected to go up this time too, to what level is still out for speculation. Most of the analysts are predicting the prize to trade upwards of $600. While their assessments are based on factors such as increased developer activity and transaction volume, influences on Bitcoin’s price will be as unpredictable as Grexit, Chinese capital controls, developer infighting and whatever else fate has in store for this virtual money.

Tag: miners

The Complex Twists of Bitcoin Scaling and a possible change in PoW Algorithm

How Bitcoin block rewards halving would impact prices

Effect on the miners:

Probable usability issues:

How would halving effect the price: