Bitcoin: Migratory mining

With the appearance and gain in value of Bitcoin Cash, a new risk appears for Bitcoin.

Indeed, for miners, it can be much more profitable to do migratory rounds between crypto-currencies. Let me explain how and why.

Bitcoin, Bitcoin Cash and other crypto-currencies will adapt mining difficulty after a number of blocks (2016 blocks, or every 2 weeks). This means that if a lot of mining power comes in right after the difficulty change, it’ll take 2016 blocks for difficulty to reflect the increase of mining power.

Now let’s suppose we have multiple mining groups agree to a migratory plan. Mine at full power on one crypto-currency until reaching the difficulty change, for example mining two weeks worth of blocks in one week only, then switch to another currency while it takes 4~5 weeks for the previous currency to see difficulty return to normal.

With an optimal migratory plan and enough high-valued crypto-currencies to migrate to, this group could be continuously mining blocks at higher speed than planned (until difficulty is re-calculated), then move to another target while confirmations for that crypto-currency become slow.

Requirements for this to work include:

  • Each crypto-currency using the same proof of work hash algorithm
  • Having enough crypto-currencies to migrate to while waiting for others to see their difficulty resume to normal
  • Each crypto-currency should have a high enough value so it’d be profitable to switch mining from one to another

At this time I do not believe any mining pool operates such migratory operations, but with the appearance of Bitcoin Cash, this became more likely. Of course during cool down confirmations times are longer (up to twice as long) so it may affect the value of the crypto-currency on the long term, but mining operators may prioritize short term profits.

There are of course ways to limit the impact of such activity by making it less profitable, but these may not be so easy to implement anytime soon.

The best way would be to see merged mining implemented between such currencies, as it would improve the security of all involved coins by sharing mining power while giving miners the required incentive (increased profits) to join in.