What is the Bitcoin Cash Difficulty Exploit

What was the Difficulty exploit and can it happen in the future? Miners flocked to Bitcoin Cash for the block rewards during a low difficulty period in August 2017.

There is a rule of thumb when it comes to blockchains- the more miners join in, the higher the difficulty. But since Bitcoin Cash appeared so suddenly, the right ratio of miners and difficulty did not come easily.

Initially, very few miners joined the pool at a high difficulty level. Instead of faster transactions, building a block took as much as five hours. Soon afterwards, the difficulty adjusted downward, to just a fraction of the original chain. Then, suddenly, a lot of miners joined in at a low difficulty, receiving 25 Bitcoin Cash for every block solved. Time between blocks fell to one minute at a certain point.

But Bitcoin Cash has a planned block time of 10 minutes- and the difficulty adjusted accordingly and lowered the profitability of mining- but not before miners filled up their wallets with rewards. And since then, the mining and difficulty of Bitcoin Cash have normalized to a ratio where the two networks have roughly the same profitability, and small differences are causing small switchovers between the two coins, but not a mass exodus of miners and pools.

Currently, an unknown mining entity is still dominating the Bitcoin Cash mining. Other large mining pools joined in, but this entity is piling up the rewards. The Unknown miner often produces one-transaction blocks, usually reserved to transfer the mining reward.

There were concerns that the difficulty exploit could reoccur and become a cyclical event, as miners moved from one network to the other. But so far, more hashing power is still devoted to mining the main network.

The hashing power of the Bitcoin Cash network is 888 PH/s, with a drop in September 2017. For Bitcoin, it is 7,746 PH/s, or 7.7 EH/s, several times higher. And for now, Bitcoin Cash is sent out from much fewer addresses, just around 13,000 compared to 600,000 and above for Bitcoin.

When comparing Bitcoin Cash and the original network, it is easy to see that BCH looks much more like a niche project. With much less Reddit subscribers, the new blockchain is currently based only on mining profitability and the interest of miners for block rewards.

And while this works for now, preserving a respectably high market price for BCH, for now the blockchain explorers reveal that BCH is in an early stage and still has to struggle for mainstream support and more users and enthusiasts.