Paper about Bitcoin / Namecoin difficulty control
Posted: Fri Apr 17, 2015 6:29 am
I've written a paper giving a statistical analysis of Bitcoin's (and thus also Namecoin's) difficulty control algorithm: http://link.springer.com/article/10.100 ... 015-0347-x The unofficial postprint is also available without paywall from my website, http://www.domob.eu/research/DifficultyControl.pdf.
The paper suggests an 'improved' difficulty update mechanism, that ensures much better stability of block times over longer periods of exponential hash rate growth. This could be useful for linking the name expiration period in Namecoin to a more stable real time. While the idea is definitely interesting from an academic point of view, note that it is not very practical as an actual solution for Namecoin. One could, instead, use block timestamps to define name expiration.
EDIT: I should probably have added the abstract here as well:
The paper suggests an 'improved' difficulty update mechanism, that ensures much better stability of block times over longer periods of exponential hash rate growth. This could be useful for linking the name expiration period in Namecoin to a more stable real time. While the idea is definitely interesting from an academic point of view, note that it is not very practical as an actual solution for Namecoin. One could, instead, use block timestamps to define name expiration.
EDIT: I should probably have added the abstract here as well:
Crypto-currencies like Bitcoin have recently attracted a lot of interest. A crucial ingredient into such systems is the “mining” of a Nakamoto blockchain. We model mining as a Poisson process with time-dependent intensity and use this model to derive predictions about block times for various hash-rate scenarios (exponentially rising hash rate being the most important). We also analyse Bitcoin’s method to update the “network difficulty” as a mechanism to keep block times stable. Since it yields systematically too fast blocks for exponential hash-rate growth, we propose a new method to update difficulty. Our proposed method performs much better at ensuring stable average block times over longer periods of time, which we verify both in simulations of artificial growth scenarios and with real-world data. Besides Bitcoin itself, this has practical benefits particularly for systems like Namecoin. It can be used to make name expiration times more predictable, preventing accidental loss of names.