Return Of The Bitcoin Chain Death Spiral.

Bitcoin mining is an economic activity. Miners will stop mining if it is unprofitable. The only exception is mining on the BCH and BSV chain where the supporters are mining to support the chain and are basically holding on to the coin for future profits. This happened in the case of BSV when the coin increased in price from $45 to $190 today. Doing the same on BTC at $9000 is not that easy.

To maintain current price there has to be about $8 million a day of new investment into BTC.

The above is the result of 1TH of mining on Viabtc. Since the halving on 11 May it is mining at a loss. Before the halving, mining difficulty was to readjust over 6 days, but today 7 days later it is expected to take another 3 days. This slowing down is due to miners leaving the network.

BTC mining profitability through price increase.

We can use the chart above to calculate the required price increase to break even on mining at the 100 EH mining today. This is ( 849/749*9000) which is $10,241. Over the last week BTC price have exceeded $10,000 briefly only to fall back to the mid $9000. There does not seem to be enough support among bitcoin supporters.

BTC mining profitability through reduction in hashrate

A mining breakeven can also be achieve if another ( 100 - 749/849*100) 12 EH of miners leave the network. This is a sizeable amount as the total hashrate mining on the BCH amd BSV chain is only about 5 EH.

Inefficient miners will stop mining.

As of today there are still 103 EH mining on the BTC chain. The price of BTC has increased from $8500 to $9500 but the number of miners have only reduced slightly from 120. Less efficient independent miners in mining pools must soon stop mining after the next difficulty adjustment in 3 days if the price does not increase.

BTC chain is slowing down and this is dangerous

The average number of blocks mined a day is about 122 compared to the 144 expected. Surprisingly the mempool has not grown much. This means that there are not many backed up transactions waiting to be processed. BTC is not suffering from a glut in popularity.

Chain Death Spiral

The chain death spiral is the theory that the BTC chain will grind to a halt if miners exit the network suddenly. This is because BTC does not have an emergency difficulty adjustment mechanism as in BCH and BSV.  BTC chain has already slowed from 10 minutes a block to 12. The problem is that when the readjustment does take place in say 3 days from today there will not be much change in the difficulty and that will have to last another 2016 blocks which on current performance could take a month.

Between BTC price increasing and miners leaving the network, miners are more likely to leave the network. This will slow the network down even more and people will start to notice. Will a white knight emerge to prop up the price, leading to a bull market and saving BTC?

BTC BCH BSV Miners Hashrate and Price

With BTC halving yesterday all three coins have halved and we can now expect that miners will be rational and mine profitably. Prior to halving BTC normally commands up to 98% of total hashrate. As of today (14/5/2020) this has reduced to 89% or 95 ExaHash and blocks found over the last 24 hours have reduced to 109 block from the standard of 144 blocks. 

Based on current prices BTC hashrate will decrease to 70% before mining equilibrium is achieved across all three chains. If this happens quickly and the hashrate drops to 84 ExaHash BTC chain will slow to a crawl. Unlike before miners who have left will not return to mine at a loss out of loyalty. Panic may set in when this becomes clear which will lead to a drop in price and we enter the dreaded Chain Death Spiral.


Drop In BTC Hashrate

Block Found in last 24 hours

Profitability Calculations.

What will inefficient BTC Miners do? 

Before Halving   11250  BTC  @ 9500 = $106.8 million =  $0.89 per Exahash (120 Exahash)

After Halving        5625 BTC  @9500  =  $53.4 million  =  $0.56 per Exahash  (95 Exahash )

BTC hashrate must reduce to 70 Exahashes to equate pre halving earning levels. It is currently 91 Exahashes (15/5/2020) . A reduction from 95 yesterday. Where will these miners go will they move to BCH and BSV or will they shut down altogether?

Can they move to BSV or BCH ?

5625 BSV @ 190 = $1.06 million = $0.75 million per Exahash ( 1% = 1.4 Exahash)

Since BTC halving the hashrate of BCH and BSV have increased to 3% and 2% respectively. However the miners who moved here will also be mining unprofitably as the price of BCH and BSV remained stagnant.

Since 11 May 50 Exahashes have been turned off. Only 87 Exahashes are left mining on BTC and it needs to decrease even more.  As a result the BTC chain is slowing down. The next difficulty adjustment is expected in 4 days and perhaps more if more miners stop mining. Even if it makes it to the next difficulty adjustment, the next difficulty is expected to increase from 16.1 T to 16.48 T !! This is a serious problem for the BTC chain.

This situation is fluid and developing. The BTC mempool is increasing fast.

It now cost over $5 to transact on the BTC chain. This situation will get worse. 

Why is the price of BCH ans BSV stagnant?

Since halving the price of BTC moved from $8700 to $9700 but the price of both BCH and BSV did not move in tandem. This can only mean that the supporters of each chain have remained steadfast. 

BTC supporters are unable to push the price past the required level of $14,000 at least. BSH and BSV supporters can remain where they are. Unless BTC supporters moved over to either of these two chains their prices will remain stagnant. The ball is in BTC supporters court. As the mempool bloats, and cost of transactions get ever higher, panic will set in.

Because BTC chain is slowing down, it is unlikely that BTC price will go any higher. If panic sets in BTC price will collapse.  At time of BTC halving it was expected that the next difficulty was to be readjusted in 6 days that has now passed and it is expected to take another 3 days. I suspect that it will be even longer possibly another 6 days. If this is true then the next difficulty adjustment could take as long as a month! Something will break before then.

BTC miners have been net selling mined coins since the halving

This graph from Byte Tree shows the net selling by BTC miners since the halving. 

After halving miners must morph into Transaction Processors

As I write this we are just a day past the BSV halving, two days past BCH halving, and another 30 days before BTC halving.

A note on crypto prices

Price changes in alts follows the price of  BTC because alts are  mainly paired against BTC on almost all exchanges. This will remain the case unless we can decouple from BTC.

One way that this can happen is to pair against Tether (USDT). As of today it has a marketcap of 6.5 billion, an increase of about 2.5 billion recently. However Tether will need a much higher marketcap in order to replace BTC.

Another is if a clear winner to emerge out of the BTC, BCH and BSV hash war.

Mining Economics

For the next 30 days most miners will mine the BTC chain. BCH and BSV chains will revert to their foundation miners Btc.com for BCH and Coingeek for BSV.

Mining at a loss, hodling and waiting for the price to rise.

If the halving of BCH and BSV is any guide, BTC. will most likely maintain price prices on a bearish tone. This means that BTC mining will also be unprofitable.

It is unlikely that miners will continue to mine at a loss. Less efficient miners will have to leave until the difficulty adjusts for mining to be profitable again.

Some miners may decide to mine and hold until the price increases, but this is a risky proposition.

For BTC the Chain Death Spiral also threatens like "Democleas Sword".  BTC will be at maximum difficulty after halving, A huge drop in hashrate could trigger it.

Mining dynamics after BTC halving.

Opportunistic mining - On BCH and BTC difficulty is adjusted every block. Some miners will wait until the difficulty adjust low enough before they start mining on the chain. This is more noticeable on the BCH chain.

Price hodling - Miners leaving the BTC chain may choose to mine on BCH or BSV as the chance of these coins doubling will be higher because of it's lower prices.

Pick a winner - This will be hard to predict.

Transaction fee model - BSV wins as it is the only blockchain designed for this.

It is all about transactions

Bitcoin was designed for mining revenue to transition over to transaction fees. The halving in block subsidy was designed to incentivise this. It is incomprehensible how BTC supporters can ignore this simple reality? In the graph above we can clearly see that Fee percentage in blocks between BCH and BSV have diverge considerably after the halving. This trend will continue. BSV will continue to increase the number of transactions per block because it is designed for users to write data to the blocchain.

The major transaction volume on BSV are users writing weather data ( weathersv) and exchange data (preev) to the blockchain. However on the horizon are real enterprise users in supply chain management (unisot) (kowr) and medical data (EHR).


A new model for miners as transaction processors.

There will be a paradigm change. Miners need security of income in order to justify spending millions in hard and soft infrastructure. They will become transaction processors.

They will be able to contract with large enterprise users exclusively to process their transactions thus guaranteeing a reliable income stream. Such contracts will be hard to disrupt as a bond of trust will develop between the parties. It will also incentivise the miner to improve their service in order to keep their customers.

Buy the dip sell the top

For BSV supporters, an opportunity exist to buy the dip and sell the top until BTC halving because it will be volatile. Risky, but if you can time it right, there is an opportunity to multiply your holdings. Use wallets like Exodus, Coinomi and move between BSV and USDT. Warning - It is risky and very difficult to time the bottom and the top and too easy to get emotionally involved. Only risk what you can afford to lose. Remember most people "can pick it but cannot time it".

BSV flipped BCH in January but could not maintain the lead. In all likelihood BSV will again flip BCH before BTC halving. If this happens look for BSV to moon and win the hash wars as miners chase profits.

Paymail is here!! This is the Killer App for BSV mass adoption

Imagine paying someone by just sending money to their personal email address. Yes you can. This is Paymail and it goes into Beta today. The caveat is that it only works with a domain name address.

How it works.

Your email is the gateway to your moneybutton account. ( Relayx, Handcash )

1) You will need an invite to join the beta and you can do that through this link https://mypaymail.co/

2) Upon approval you will be given a mypaymail account example : 000@mypaymail.io

3) Adding new handles

In addition to your assigned handle you can create more handles as on the left side of the form. Each handle will cost $0.85 cents. You can use any amount of payment destination you wish.

4) What is interesting is the custom domian option on the right side.

If you or your organisation uses a custom domain for your emails, those emails can be linked to your payment destination. This means that anybody can pay you by sending money to your email address not your mypaymail handle.

I reached out to mypaymail on the process and they responded with this message.

"What DNS service provider are you using? Could you send me a screenshot of your zone editor?"

If you have a DNS provider that you have to pay for you can use the zone editor to enter the details.

and,

There is an easier way to set up the DNS records but it only works with https://www.ionos.com/ currently. So if you buy a domain from them, an autoconfiguration button appears and it will edit the DNS recods for you. 

IONOS by 1&1 » Your Host Matters. A lot. IONOS » The brand by 1&1 for Mail, Domains and Websites - We are the leading European Web Host und Specialist for Cloud Solutions. www.ionos.com

also interesting is 

"We are not far from getting Godaddy support, hopefully I will hear from them this week."

This is a huge development for BSV. You can actually pay a real active email address!! 

But!!! Yes there is a but........

"Unfortunately, Gmail does not support Paymail, so we cannot use Gmail Paymails. But you can buy a domain, create a Paymail and start using it. Later, if you want to use the same Paymail as your email address, you can buy a GSuite or Office 365 package."

Unfortunately you have to pay for the service.

So, If I send some money to someones email address will he be able to set up moneybutton and receive that money?

"Currently, the Paymail account needs to exist when your wallet makes the payment. Otherwise, your wallet will return an error. The way to send money to an email address today is to create a wallet and then register a Paymail that matches your email address using a custom domain.

The idea of sending a payment to someone that does not have a Paymail account but has an email address is quite interesting. Also free email accounts are key, as you say. We will be trying to come up with innovative ways to address these issues in the medium term."

What about a smart contract? I link my friends email to a moneybutton account. This allows me to send to his email. He then has to create his own moneybutton account and automatically receive the payment.

And their reply is most interesting

"I just had an idea similar to what you are describing. We need to implement a couple of features to make it possible but it think it is doable."

DOABLE!!!

Yes this means that you can onboard all your friends by sending them money! How many people can refuse that. And if you make this viral with a referral incentive --- Kaboom! Moon Moon Moon.

A word of thanks to Pol Moreno Yeste @ mypaymail for his help.

BTC is in trouble. Chain Death Spiral Looms. BSV Wins!

BTC hashrate dropped from 136 THs to 95 THs

Block difficulty just adjusted (26/3/2020) at block 622944

Latest block mined is 622986

Next difficulty adjustment is at 624960

Average block time for the last 2016 blocks was 11 minutes 54 secs

Current time to mine a block have reached 20 minutes. This loss of hashrate is serious and could result in the chain grinding to a halt.

What cause the loss of hashrate?

Economics! For some miners it has become unprofitable to mine and they are switching off their machines. All machines of the S9 generation will be unprofitable. The current economic climate and lock downs all over the world must also be a factor. I suppose it would be hard to convince the police that you have to go to work because bitcoin mining is an essential service.

Why is the price still holding?

There was a huge price collapse from $8000 to $5000 on 13 March and since then it has recovered to just over $6000. However it has been a phenomenon of selling the top. Whales are exiting!!

BCH and BSV

Most institutional investors would move out of crypto entirely until the scene settles. BCH and BSV do not suffer from hashrate gyrations because blocks adjust dynamically. However both will be undergoing halving in the next 14 days. The block subsidy will halve from 12.5 to 6.25. This is a 50% reduction in revenue if the price stays the same.

What will become obvious is that on BSV the income from transaction fees is increasing even reaching 50 coins yesterday. After halving only 900 coins will be mined per day. If this trend continues miners will start mining BSV as it will be much more profitable than mining BCH after the halving.

BTC is in trouble. It may finally succumb to the dreaded Chain Death Spiral.