Gregory Maxwell Claims the Bitcoin Cash Mining Income is Being Inflated

By August 22, 2017Bitcoin Business
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TheMerkle Bitcoin Cash Mining Inflation

Ever since Bitcoin Cash was launched, there have been a lot of conflicting reports regarding the adjustable mining difficulty. A new chat log involving Greg Maxwell seemingly indicates how BCH miners can willingly take advantage of this algorithm and ensure they generate a higher amount of coins on demand. That is quite a serious accusation, even though the information provided by Maxwell seems to confirm this is indeed possible. Additionally, it seems the way the difficulty is calculated leaves much to be desired as well.

Bitcoin Cash Mining Difficulty Concerns

There are plenty of reasons to be concerned over how the Bitcoin Cash mining difficulty is determined. We have seen a major influx of hashpower over the past few days, yet the network difficulty is still only at 7% of the Bitcoin blockchain. That seems quite strange, as this lower difficulty combined with a higher hashrate allows mining pools to successfully reap block rewards in quick succession. In fact, the average block time is down to around three minutes at the time of writing, which means around 280 BCH is created on the network every hour.

Figuring out why this is even possible has proven to be pretty challenging. Everyone knows the Bitcoin Cash ecosystem uses a different mining difficulty algorithm which can introduce sharp drops or increases whenever needed. Right now, it seems more hashpower results in a lower mining difficulty and more coins being generated. This is a very unusual turn of events, as it causes a ton of speculation as well. One of the people weighing in on these discussions is none other than Gregory Maxwell.

In his opinion, there are several flaws in the BCH mining difficulty readjustment. First of all, it is possible for miners to ramp up the difficulty and mine away for 12 hours after it will attempt to readjust. It is this 12-hour window that has Maxwell somewhat concerned, since it appears the difficult calculation process is flawed at best. The chat log claims how the network blocks leave an old timestamp on previous blocks for a bit before jumping up to the normal time to trigger the difficulty adjustment. After this trigger occurs, they will repeat the process over and over again to keep the difficulty low and coins flowing in.

If that is not enough to be concerned about, it appears any BCH miner can successfully trigger these difficult adjustments with little effort. Even if other entities would try to prevent it from happening, they will be unsuccessful in doing so. This will result in more network blocks being created and more BCH brought into circulation. That would certainly explain why the Bitcoin Cash price is coming down hard over the past 48 hours. It appears there are a lot of coins being sold at an accelerated pace.

Maxwell also states the following:

“And of course, inflating the mining income is in the collective short term interests for all bch miners… (maybe you can argue that in the long term they’re better off not doing things that might show weaknesses and lower its value)”

Assuming there is some truth to these statements one would have to ask themselves who would benefit from this inflated coin production. ViaBTC is the only mining pool generating a lot of blocks, although Antpool and may have something to say about this. Both pools are now mining BCH as well, although it is possible they hashrate will not go up by much over the next few days. Additionally, the BCH price was also heavily inflated due to trading on Bithumb, which is a zero-fee exchange

All things considered, there are a lot of discussions pertaining to Bitcoin Cash right now. There is also a lot of speculation and misinformation, which is only made worse by the lack of a proper BCH development team right now. For a cryptocurrency with a market cap of around $10 billion, there is a lot of work to be done. It will be interesting to see how things play out in the coming weeks and months, but a lot of people will keep a close eye on the mining situation.

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