Analysis of the halving times of BTC, BCH and BSV

introduction

As we all know, BTC, BCH, and BSV will halve their rewards again at block height 630,000. But what many people may not have noticed is that the BTC halving is likely to occur at the end of April 2020, while the halving of BCH and BSV will almost certainly occur at the beginning of April 2020.

This time difference makes the halving event, which already involves many people, even more subtle.

1. Why is there a halving time difference?

Every time 210,000 blocks are mined on the BTC network, the block reward is halved. If BTC, BCH, and BSV all maintain an average mining speed of 10 minutes per block, the three should be halved at the same time. However, this is not the case in reality. The main reason is that BTC's difficulty adjustment algorithm cannot guarantee an accurate 10 minutes per block, and when BCH forked from BTC, it adopted the EDA emergency difficulty adjustment algorithm.

BCH inherited the mining difficulty of the BTC network when it forked on August 1, 2017, but its total network computing power is less than 10% of the BTC network computing power. With this sharp decrease in computing power and the unchanged mining difficulty, it may take more than 100 minutes for BCH to mine a block.

Source: bitinfocharts.com

This brings two problems. The first problem is that the difficulty adjustment time is delayed. BTC adjusts the mining difficulty every 2016 blocks. At that time, BCH was 1250 blocks away from the next difficulty adjustment. It would conservatively take three months to mine these blocks. Therefore, the network would be in a high difficulty state for a long time, making it difficult to attract miners to join.

The second problem is that even if miners can mine without considering their own interests, transactions on BCH cannot be carried out. Generating a block every 100 minutes means that a transaction can only be packaged every 100 minutes. If a transaction is confirmed after 3 blocks, it will take 5 hours to wait; and we know that transactions with larger amounts are recommended to be confirmed after 6 blocks.

In this case, if BCH adopts the difficulty adjustment algorithm of the original network, it may cause its new network to be difficult to survive. In fact, before the invention of EDA, traditional theory has always believed that a small computing power fork like BCH cannot survive.

The EDA algorithm is simply as follows: when the block height is an integer multiple of 2016, the BTC difficulty adjustment algorithm is used; when the block height is not an integer multiple of 2016, if the MTP11 time of the parent block of the current block (the middle time of the first 11 blocks including this block after sorting by blocktime) and the MTP11 time of the (parent block - 6)th block differ by 12 hours, the difficulty of the current block will be reduced by 20%.

This algorithm can quickly reduce the mining difficulty in a short period of time, thereby solving the crisis of network difficulty in producing blocks, but it also brings new dangers to BCH.

In the EDA algorithm, the mining difficulty can be adjusted down quickly and continuously, but it can only be adjusted up after every 2016 blocks. Therefore, miners can withdraw their computing power first, so that the difficulty of BCH mining can continue to decrease, and then enter the network at a low mining difficulty, quickly and easily mine blocks, until 2016 blocks are mined, triggering an upward adjustment of the difficulty, and then withdraw their computing power, and then wait for the difficulty to decrease again.

This not only caused the computing power on BCH to fluctuate, but also made the block generation rate of BCH too high. As shown in the figure below, the blue curve represents the blocks mined by BCH every day, and the red curve represents the blocks mined by BTC every day. It can be seen that during the period of using the EDA algorithm, the block generation rate of BCH was higher than 144 blocks/day for most of the time. A high point of the curve selected in the figure shows that on October 28, 2017, BCH mined 1,254 blocks.

Source: coinmetrics.io

This makes BCH and the later forked BSV mine far more blocks than BTC. As shown in the figure below, BCH once led BTC by nearly 10,000 blocks. From the perspective of token output, BCH produced about 123,000 tokens ahead of BTC.

Source: coinmetrics.io

2. Analysis of BTC, BCH, and BSV halving time

In order to change the above situation, BCH upgraded from the EDA algorithm to the DAA algorithm. In simple terms, the algorithm sets the mining difficulty block by block based on the computing power of the first 144 blocks in the current state. This is a window-moving difficulty adjustment algorithm that adjusts the difficulty for each block, which can respond to changes in computing power on the network in a timely manner. After implementing this algorithm, BCH and BSV have basically stabilized at a block output speed of 144 blocks per day.

If the block generation speed of the BTC network is also stable, the block height difference between BTC, BCH, and BSV will be fixed at 10,000 blocks. However, the continuous growth of the BTC network computing power has narrowed this gap.

The BTC network adjusts the mining difficulty in this way: if the network computing power increases and the average block time of the last 2016 blocks is less than 10 minutes, the mining difficulty will be increased in the next cycle; if the network computing power decreases and the average block time of the last 2016 blocks is more than 10 minutes, the mining difficulty will be reduced in the next cycle.

But there is a problem here. The difficulty adjustment algorithm determines the mining difficulty in the future based on the computing power in the past. If the computing power in the future changes significantly compared to the computing power in the past, the block speed cannot be guaranteed. If the network computing power continues to increase, the block speed will always be higher than 10 minutes/block. This is the current situation of the BTC network.

In the figure below, red represents BTC, blue represents BCH, the curve is the blocks produced every day, and the shadow is the mining difficulty. It can be found that the computing power of the BTC network has been growing continuously recently, and the block production speed of BTC is usually higher than 144 blocks/day.

Source: coinmetrics.io

Back to the topic of this article, due to the stable block speed of BCH and BSV, and the high block speed of BTC, the gap in block height between BTC, BCH and BSV is constantly narrowing. As of the time of writing this article, the block height of BTC is 589,275, BCH is 594,964, and BSV is 594,749 (source: coin.dance).

BTC will reach the halving height of 630,000 after 40,725 blocks are mined; BCH will halve after 35,036 blocks are mined; and BSV will halve after 35,251 blocks are mined. The current block height difference between BTC and BCH is 5689, and the block height difference between BTC and BSV is 5474.

How will this height difference affect the relative halving time of BTC, BCH, and BSV? The following special cases may be able to frame a rough range:

1. If BTC computing power maintains the growth rate in recent period, and one block is mined every 9 minutes and 30 seconds, then BTC will produce about 151.6 blocks per day. The halving of BTC will occur at the end of April next year, and the halving of BCH and BSV will occur at the beginning of April next year. There will be a 25-day halving time difference between the three. This is also the most likely scenario.

2. If BTC's hashrate remains constant and 144 blocks are produced every day, BCH and BSV will halve 39 days earlier than BTC. This may be seen as the maximum time difference between the three halvings.

3. If BTC computing power continues to grow, producing 167 blocks per day, the growth rate is 16%. In this case, it will catch up with the block height gap, and BTC, BCH, and BSV will halve at the same time. However, this situation is unlikely to happen.

In general, the faster the BTC hashrate continues to grow, the smaller the halving time difference will be; if the BTC hashrate decreases instead of increasing, the halving time difference will widen; changes in the hashrate of BCH and BSV will not affect the halving time difference. Considering the reality, the halving time difference between BTC, BCH and BSV may be in the range of more than 20 days to more than 30 days.

3. What will the halving time difference bring?

BTC, BCH and BSV use the same ASIC mining machine. From the figure below, we can easily find that the motivation of miners to pursue higher returns makes BTC, BCH and BSV have similar daily mining returns, and the computing power is flowing among the three cryptocurrency networks.

If BCH or BSV halves before BTC, without considering the price of the currency, this means that mining income will also be halved, and miners will switch their computing power from BCH or BSV to the BTC network because the income there remains at the original level. Before BTC adjusts the mining difficulty, half of the computing power of the halved network will be motivated to switch to BTC; after the difficulty is adjusted, because the influx of computing power in the previous cycle will increase the difficulty, a small part of the computing power should be switched back to the original network until the mining income of the three forms a new balance.

The network that halves first will lose a large amount of computing power, and the fluctuation of coin price can change the direction of computing power flow. If the price of BCH or BSV rises at the same time as the halving, the outflow of computing power will be reduced; if the price of BTC rises due to halving expectations or other reasons, it will attract more computing power to BTC.

Closely related to the level of computing power is the issue of network security. For BCH and BSV, an early halving will put them into a relatively vulnerable period. Security issues will also trigger a series of chain reactions. For example, when the cost of attack is reduced, exchanges will increase the number of confirmations for security reasons, and a higher number of confirmations will reduce the availability of the network.

Will BCH and BSV use methods to retain computing power? Will the price of BTC increase rapidly due to the halving expectation, attracting more computing power? How will the new game between BTC, BCH, and BSV unfold? The answers to all these will have to wait until 8 months later, when it may be a spring of multiple parties competing and undercurrents surging.

Source: Nuclear Finance,