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Comment by swalsh | Hacker News Reader

"It then sends the 80-byte block header to its mining hardware (an ASIC) along with a target threshold (difficulty setting)."

I've always wondered, would it be possible to make the difficulty setting dynamically determined based on some econometric derived from the bitcoin chain? (such as if you see the economies velocity slowing down, perhaps you lower the threshold) or the opposite.

If it was, that may be one way to stabilize the prices, at least of the currency itself.

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No one has figured out a way to do this without outside information. Some blockchains include price feeds from the outside world that let algorithms keep prices relatively stable. Others use votes by currency holders to adjust the money supply both directly and indirectly (via interest rates) like a central bank would. Both strategies have led to cryptocurrencies that track the price of the dollar.

Can you give examples of cryptocurrencies that track the price of the dollar?

The two I'm familiar with are BitShares and NuBits. BitShares uses contracts-for-difference and price feeds to create stable "BitAssets", like BitUSD, BitCNY, and BitGold. NuBits is a central bank on a blockchain, and it uses its control of the monetary base and interest rates to peg its value to the dollar.

Disclaimer: I own some BitShares. I won't answer more questions here to keep things on topic, so email those to me.

The purpose of difficulty is to keep the block time around 10 minutes; if you use it to perform some other function then you'd end up with unpredictable block times. I think setting the block reward to a function of difficulty would stabilize a cryptocurrency[1], but that very stability would probably lead to failure if the resulting exchange rate and difficulty are very low.

[1] https://blog.ethereum.org/2014/11/11/search-stable-cryptocur...

If you were going to go that route, it would make far more sense to play with the block reward amounts (because they're kept too low to do anything).

But, the bitcoin people have philosophical reasons to avoid that.

I think it's possible to do that, though that wouldn't really be Bitcoin anymore. If the difficulty were fluctuating with the same amount of computing power out there, the block time would be changing a lot.

This would make for different amounts of bitcoins being released rather than the (fairly) predictable current schedule.

"This would make for different amounts of bitcoins being released rather than the (fairly) predictable current schedule."

This is kind of the point. A predictable release of new bitcoins into the economy has no basis in good economics.

The main point of blocks is not to release bitcoins -- it's to timestamp and "lock in" blocks of transactions. You want to vary the reward or fees of you do anything here :)

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