Abstract: Ter this lump wij look at the hash-rate oscillations inbetween Litecoin (LTC) and Dogecoin (DOGE) ter 2014. Wij compare it to the current Bitcoin (BTC) and Bitcoin Specie (BCH) hash-rate oscillations and consider whether wij can learn any lessons from history.
Albeit there are many crypto tokens, the number of proof-of-work tokens, with their own set of miners, is remarkably puny — so having two significant proof-of-work tokens that share the same hashing algorithm is fairly zonderling. There emerge to be three examples of significant hash-rate oscillations caused by this zuigeling of setup:
A comparison of the 2014 Litecoin (LTC) versus Dogecoin (DOGE) hash-rate oscillations with the 2018 Bitcoin (BTC) versus Bitcoin Metselspecie (BCH) oscillations may expose some lessons.
Te early 2014, Dogecoin liked a unexpected, meteoric increase ter price (figure 1). Its mining incentives enhanced quickly and this attracted significant hash-rate. The consequences resembled those of Bitcoin Specie’s infamous emergency difficulty adjustment (EDA), which resulted ter acute drops te mining difficulty and made Bitcoin Contant’s mining incentives higher than Bitcoin’s for brief periods. Both instances caused acute swings ter the hash rate and network distribution inbetween the respective coins.
Wij will look back at the 2014 incident with the help of some charts of hash-rate oscillation to see what it has to tell us about the swings ter hash rate inbetween Bitcoin and Bitcoin Contant, which many are tracking on the fork.lol webstek.
Mining incentives vs. the difficulty adjustment
The hash-rate distribution inbetween two tokens with the same hashing algorithm should, te theory, be allocated te proportion to the total value of mining incentives on each respective chain. Mining incentives can be thought of spil the USD value of both expected block prizes and transaction fees ter any given period of time.
Even when token prices, block prizes, and transaction toverfee levels are temporarily stable, within difficulty adjustment periods further oscillations can occur because miners may switch to more profitable tokens with lower difficulty until the difficulties of the two tokens achieve equilibrium.
Litecoin vs. Dogecoin te 2014
Dogecoin loved a large price rally ter early 2014 and then began to challenge Litecoin for the title of the highest hash-rate Scrypt-based token. Litecoin has a two-and-a-half-minute block target time and its difficulty adjusts every three and a half days. Dogecoin has a one-minute target time and at the begin of 2014 had a four-hour difficulty adjustment period.
Figure 1: Litecoin (LTC) versus Dogecoin (DOGE) price chart for 2014 (te USD). (Source: Coinmarketcap, BitMEX Research)
The Dogecoin price enhanced much quicker than Litecoin te the early part of 2014 albeit, spil figure Two shows, Dogecoin never indeed approached Litecoin’s market capitalisation. Despite its lower market capitalisation, Dogecoin’s higher inflation rate meant that miner prizes were often higher, and a majority of the Scrypt hash rate switched overheen to Dogecoin during some periods.
Figure Two: Litecoin (LTC) versus Dogecoin (DOGE) market capitalisation te 2014 (ter millions of USD). (Source: Coinmarketcap, BitMEX Research)
Dogecoin’s hash rate exceeded Litecoin’s ter late January 2014, spil figure Trio indicates. The hash rate swung inbetween the coins for harshly a month spil miners switched back and forward.
Figure Three: Litecoin (LTC) versus Dogecoin (DOGE) hashrate chart – billion hashes vanaf 2nd – 2014. (Source: Litecoin blockchain, Dogecoin blockchain, BitMEX research)
When, te 2018, Bitcoin Contant had higher mining incentives vanaf unit of time than Bitcoin, many miners switched to Bitcoin Contant, repeating the pattern of 2014. Spil figure Four shows, miners followed the money back then too.
A key difference is that even after the difficulty found equilibrium, Dogecoin at times suggested higher USD value of mining incentives. Te 2018, te tegenstelling, Bitcoin Metselspecie’s incentive lead wasgoed always only driven by anomalies te the difficulty adjustment algorithm. Bitcoin always had higher incentives vanaf block than Bitcoin Specie. The higher incentives of Bitcoin Contant came vanaf unit time from its swifter blocks and spil soon spil the difficulty returned to equilibrium, Bitcoin regained its position spil the highest incentive SHA256 coin.
Figure Four: Litecoin (LTC) versus Dogecoin (DOGE) mining incentive (USD vanaf day) versus hash-rate share ter 2014. Transaction fees were not included ter the mining-incentive calculation. (Source: Coinmarketcap, Litecoin blockchain, Dogecoin blockchain, Dogecoin Github, BitMEX Research)
Te order to calculate mining incentives for Dogecoin, wij had to consider what occurred ter 2014, including six switches to the block prize and two hardforks. Thesis switches are outlined ter the table of figure Five.