Bitcoin Miners Take Over the BCH Network

October 29, 2019, by Marko Vidrih on ALTCOIN MAGAZINE

Bitcoin Cash (BCH) has disappeared from the headlines for a long time, but now the Bitcoin’s Fork of 2017 ensures again with unpleasant news.

Last weekend Bitcoin Cash had no blocks for over three hours. This is nothing extraordinary at first, but rather rare. In addition, there can be many different reasons. However, if it occurs more frequently and does not stabilize, then there could be another reason for the blocks to fail. That’s exactly what happens with Bitcoin Cash. Bitcoin (BTC) miners are apparently taking advantage of Bitcoin Cash (BCH)’s low hashrate to quickly find blocks and cash out rewards in BCH.

Bitcoin Cash Hashrate is subject to massive fluctuations

For three hours the blocks on the BCH Blockchain remained off. Subsequently, within the next hour suddenly 20 blocks were found. Considering that the goal of the self-regulating system is 6 blocks per hour, that is, 18 blocks after 3 hours, then the deviation in the period remains relatively low. But that’s no cause for concern, as long as the time between blocks approaches the 10-minute per block — but that’s not the case with Bitcoin Cash. The fluctuations remain and are not accidental, but intentional. If you visualize the whole thing, it looks like this:

The chart shows the blocks found per hour for each Bitcoin as well as the Bitcoin cash network. Striking are the strong fluctuations in Bitcoin Cash between 1 and up to 20 blocks per hour. Source: fork.lol

What does the graphic show us? It shows us the number of blocks found per hour on Bitcoin and on the Bitcoin Cash network. Orange for Bitcoin and Blue for Bitcoin Cash.

Adaptation of Mining Difficulty at BCH and BTC

At this point, it is important to understand how the adjustments to the hashrates in Bitcoin and Bitcoin Cash work. One block should take 10 minutes in both networks, which means we expect to find 6 blocks per hour. How “fast” a block is found depends crucially on how much computing power is used for the search.

This computing power is called a hashrate. If the provided Hashrate increases or decreases, the time between the individual blocks deviates. The goal of 6 blocks per hour is not reached. Here comes the Difficulty in the search for the next block. The Difficulty keeps adapting to the network’s hashrates to reach the predefined 10-minute target. This happens differently with Bitcoin and Bitcoin Cash.

With Bitcoin, the Difficulty adapts every 2 weeks, as the algorithm checks the actually needed time. Bitcoin Cash does this after each block and the algorithm checks the last 144 blocks. This algorithm, named Difficulty Adjustment Algorithm (DAA), was implemented in the BItcoin Cash protocol in November 2017, three months after Bitcoin Hardfork.

Previously, BCH’s algorithm was similar to Bitcoin. Under the name Emergency Difficulty Adjustment (EDA), the adjustments were also made every 2 weeks. However, due to much lower hashrates than Bitcoin, this provided insufficient block interval stability and was therefore changed to DAA a few months later.

Persistent fluctuations in the BCH block time

In a perfect world, where we would not have any miners who would go out of the network with their hashrates, we would have a straight at 6 blocks per hour. So there would always be a constant 6 blocks per hour.

However, the graphic above differs completely from the ideal theory. We see that while Bitcoin settles relatively constantly around the value of 6 — sometimes more, sometimes less. This can have many reasons, miners that have been shut down or just coincidence. As soon as certain miners leave the network, the deviation should remain constant. So if the hashrates eg. is falling by 10%, the number of blocks, rather than 6 blocks per hour, should be more than 5.4 blocks per hour until the next adjustment of the difficulty. So about 10% less blocks per hour.

In the graph, Bitcoin Cash does not settle around the 6 blocks per hour but fluctuates between 1 block and 20 blocks per hour. The block interval should fluctuate much less and approach the 10-minutes per hour since the Difficulty much more often adapts to the particular Hashrate as Bitcoin. So where does this absurdity come from?

Miners exploit the weak network

This can be attributed to a similar reason, which already led to the change from EDA to DAA at Bitcoin Cash. So the algorithm according to the Difficulty is adapted to the Hashrate. Back then, after Bitcoin Cash’s hardfork, some BTC miners took advantage of the weaker computing power in the BCH network.

The bigger miners pulled out their hashrates in the Bitcoin Cash Network and waited for the Difficulty to adapt to the lower hashrate, making blocks easier to find. After the adjustment, the miners were turned on again or by eg. The Bitcoin Blockchain was deducted and could find so many more blocks in a short time on the BCH network.

Exactly this procedure we can observe right now. Someone seems to take advantage of Bitcoin Cash’s DAA algorithm. But that should compensate for the DAA algorithm, so what’s the problem?

Here’s an example to make it clear:

3h no blocks are found. That may be because performance has migrated or someone has temporarily provided a lot of computing power. Since the hashrate has suddenly dropped sharply, the Difficulty adjusts accordingly strong. It is important that in this scenario we only observe a period of one day, ie 144 blocks. 3 hours without block thus represents 12.5% ​​of the period without any block, where actually 18 should be.

The miner, who has previously deducted his power, provides this again and can now find many blocks in a much shorter time. This works because the Difficulty is suddenly very low and still 18 blocks are missing. Thanks to the low difficulty, the big miner fills this void quite quickly, eg. by finding 20 blocks in one hour. Then the average number of blocks also fits again. There are still 144 blocks per day found, but not constantly every 10 minutes but approximately every 200 minutes or 3 minutes.

10 Bitcoin Cash blocks within 34 minutes. Source: bitcoin.com

Bitcoin Cash in front of a 51% attack or just exploited?

The problem is that in the scenario, not all miners are the same. The “honest” Bitcoin Cash miners are constantly investing energy in finding blocks, even over 3 hours where only one block is found. The “dishonest” Bitcoin Cash miners, on the other hand, invest their energy only in periods where up to 19 blocks / h can be found. Thus, the cost of dishonest miners can be lowered properly, by a third or half, with the same number of found blocks.

In addition, it can be assumed that the “dishonest” miner or attacker does not depend so much on his Bitcoin Cash as the honest miners. So he could be more inclined to sell the coins directly. This is also shown by the fluctuations, which are proof that the miner does not care about the stability of the BCH network.

This shows us also the distribution of the hashrate of the last 7 days. Unknown miners have consumed more than 50% of Bitcoin Cash’s total hashrates. This also increases the risk of a 51% attack, for example: to do a double-spending. Although the miners use this only to get cheaper BCH but the risk of a real attack can not be ruled out. It is not clear who exactly is behind these miners.

Distribution of Bitcoin Cash Mining Pools. Source: coin.dance

Proof-of-work coins with SHA256 can not exist in the long term alongside BTC

The attackers pursue the following strategy with Bitcoin Cash: In the times of the low Difficulty they mine BCH and with high Difficulty BTC or what other mines. During the high difficulty, the honest miners pay a lot of money for electricity to just keep the BCH Chain running and out of the Valley of the Deep. This effect destroys sales for honest BCH miners and forces them to look for alternatives, or in other words, makes it more attractive for them to mine Bitcoin.

This clearly shows that all proof-of-work (PoW) coals with SHA256 mining are exposed to similar dangers due to relatively low hashrates compared to Bitcoin. At any given time, a Bitcoin network’s relatively small miner can take over most of the network of a smaller coin and attack or exploit it.

Why is it now more important? One reason could be a research paper from this year, which deliberately dealt with the DAA algorithm of Bitcoin Cash. The document can be downloaded here.

The amazing thing is that this has not affected the Bitcoin Cash price. On the contrary, the Bitcoin course explosion a few days ago has also pulled the BCH course with it.

Author: Marko Vidrih