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The cryptocurrency market discussed the so-called death spiral that was "threatening" Bitcoin at the end of 2018. Last year, Bitcoin (BTC) lost more than 80% of its value to entire network. This mining spiral was triggered by the fact that the currency was decreasing in price and mining activities were no longer profitable.
In fact, the Bitcoin hash rate dropped about 50% from August to December. However, even the difficulty of Bitcoin has adapted and the market has recovered. Several miners have left the market allowing the difficulty of extraction to adapt downwards. After that, the number of miners has increased again, with a growth of 46% since December.
A professor from the University of Santa Clara, called Atulya Sarin, wrote an article about how Bitcoin was entering a spiral of death and that the currency could get to zero. The difficulty of extraction is adjusted every block of 2016 extracts, approximately every two weeks. At the same time, as Bitcoin hash power drops, even the time it takes to emit a new block would take longer. Eventually, mining activities become less profitable and leave the market. This therefore creates a spiral of death.
Watch Magical Crypto Friends Episode 15: Green Screen Extremism.
In this episode: Consensys & Bitmain layoffs, Custodial LN Wallets, $ LTC UFC sponsorship, Bitcoin Maximalism vs Extremism, Grin / Beam, … @SatoshiLite @fluffypony @Excellion @WhalePandahttps://t.co/53PpvenyR6– Magical Crypto Friends (@magicalcrypto) January 18, 2019
During an episode of Magical Crypto Friends, Riccardo Spagni and other cryptographers like Samson Mow, Charlie Lee and Whale Panda discussed this problem.
Whale Panda explained that the difficulty adjustment aims to avoid the spiral of death phenomenon. At the same time, Mow explained that the regulation of Bitcoin difficulty tends to happen more slowly than Bitcoin Cash (BCH).
Riccardo Spagni commented on this problem:
"It's self-corrective, but the other thing is that there's a limit to the amount of regulation that can happen in every adjustment cycle, so, relatively speaking, it adapts slowly, which means that can compensate for price volatility much better than some of the fast-fitting algorithms that try to keep track of the difficulties that are much closer. "
He also went on to say that people forget that if miners exist they will sell equipment and recover some of the money.
As soon as these miners enter the market again, they help the difficulty to grow once again and stabilize the market.
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