Are next few weeks dangerous for bitcoin?

in #bitcoin8 years ago

By the way happy halvening!

And that's the source of possible danger. The reason is quite simple.
As we know the supply of coins that miners can get per block was reduced by 50%. But their expenses for electricity and hardware will remain the same, so their profits will drop. That can lead to significant drop of network hashrate.
In case of significant hashrate drop blocks will be solved much slower and the interval to the next difficulty recalculation will grow. It's about 2 weeks in average, but the more hashing power will drop, the later recalculation will happen. In the worst case it will happen never again.
This can be avoided by huge price increase (to over $1200 per BTC) right now, but I think it will hardly happen.
But actually that's not a big problem by itself.

Let's have a look at the Bitcoin blockchain from another side.
blockchain.info provide beautiful charts that show various statistical information. I like these charts and from time to time i like to inspect them. The chart that is interesting for us at the moment is here: https://blockchain.info/charts/avg-block-size

As you can see, average block size is not far from 0.8MB in average during this year, that's 80% of maximum capacity. Peak values are about 95%. Actually these numbers are slowly less than they should be because of cheaty blocks with only 1 transaction. I think the true peak values are about 96-98%. So we need about 25% increase of transactions number to get transactions demand higher than actual network possible supply.
That's not a big problem by itself as well, because there is 25% capacity. Actually, less than 25%, because of cheaty blocks.

Now let's imagine what can happen when we combine these two problems.
Significant hashing power drop will slow down the blockchain speed. Transactions speed will remain the same, so in case of 50% or more decrease transactions demand will be more than supply by more than 20%.
The very first result will be enormous fees and stuck transactions with normal fees. If the speed remains the same, problems with nodes will be possible. That can cause bitcoin price drop.
Bitcoin price drop makes spiral. At every new loop new miners are thrown away by reducing profitability.
Spiral means death (or something near) for bitcoin once appeared. At some moment panic sell will start making the mining unprofitable and the network unstable.

First of all sorry for my english. I'm not a native speaker and this post is the first serious one written in English.
And sorry if this post is about something trivial and known by everyone.

Anyway I hope the post is somehow useful and this scenario will never happen.
Good luck to everyone! And thank you so much for reading this post to the end )