Bitcoin's Proof-of-Work is becoming more efficient

Leo Zhang

By Leo Zhang

It's common knowledge among the miners that there exists some correlation between hashpower and spot price. While at times the two trends decouple and manifest counter-intuitive patterns, the fundamental connection is simple: hashpower crystalizes the security of the network, making it more valuable; price in turn attracts the participation of miners. However, the many attempts at simply finding the correlation never seem to be perfect.

In two articles below, the author approached the problem from a different angle. He first defined a set of metrics such as Number of "Bitcoin.Hashes Secured" by an UTXO, Number of "Bitcoin.Days Secured" by an UTXO(first article), Price-Performance Ratio of Bitcoin's PoW(second article). Running these metrics over historical data yield some pretty interesting insights to measuring the utility of Bitcoin's PoW.

Gravity
(LaurentMT)

"At last, we have derived two metrics which both suggest that contrary to a widespread opinion, Bitcoin’s PoW is actually becoming more and more efficient."

The Yin and Yang of Bitcoin
(LaurentMT)

"Once again, the metrics suggests that the system has become more efficient over time but the most interesting insights gathered from this metrics are certainly related to the analysis of its multiple oscillations. To my surprise, it remarkably synthetizes multiple past observations made about the interrelation between the market price and hodling & mining behaviors. It also highlights the influence of the market price over the efficiency of the system through its influence over hodling and mining."

Technical Updates

Bitcoin as a Privacycoin: this tech is making Bitcoin more private
(Bitcoin Magazine, by Aaron van Wirdum)

"In addition, Schnorr signatures’ mathematical properties will benefit a brand new class of more complex, smart contract-like solutions with names like 'scriptless scripts,' 'Taproot' and 'Graftroot.' Interestingly, these solutions would appear like regular Bitcoin transactions on the Bitcoin blockchain. This could for example enable futures markets, decentralized exchanges or insurance contracts without spies being able to identify anything but regular-seeming transactions."

Ethereum in BigQuery: a public dataset for smart contract analytics
(Google, by Allen Day and Evgeny Medvedev)

"A visualization like this (and the underpinning database query) is useful for making business decisions, such as prioritizing improvements to the Ethereum architecture itself (is the system running close to capacity and due for an upgrade?) to balance sheet adjustments (how quickly can a wallet be rebalanced?)."

Decentralized autonomous funding of blockchain projects
(Richard Red)

"The goal of a Treasury is to distribute this money in a way which efficiently furthers the project’s aims. A big question here is whether to make payments up-front or in arrears, or some combination of the two, or different approaches in different contexts."

News & Commentary

Why Bitcoin & why sooner rather than later?
(Hackernoon, by Jonathan Cheesman)

"Looking to emerging markets, the turmoil we have see in 2018 has been accentuated by a liquidity squeeze as the Fed tapers its balance sheet. Many economies are reaching breaking point and are seeing huge wealth destruction (asset prices, currency depreciation and inflation) as a result. Savers across EM should be converting to bitcoin as it is a hedge against their local economy."

Announcing the Casa Lightning node
(Casa, by Michael Borglin)

"While building this project, we uncovered many barriers preventing broad Lightning adoption. Building a Lightning node device solves many of those problems, but it also creates a new problem around key management."

Announcing ShapeShift membership
(ShapeShift, by Erik Voorhees)

"Membership requires basic personal information to be collected. Today, Membership is optional, but it will become mandatory soon."

Contagion or not, these emerging markets hold key to selloff
(Bloomberg, by Srinivasan Sivabalan and George Lei)

"This year’s global emerging-market selloff has its roots in a slew of mini-routs as the era of easy-money came to an end. Consider Turkey, now paying the price for its refusal to follow orthodox monetary policy; Argentina, facing a crisis of confidence just four years of its last default; China, targeted in a trade war; and South Africa, the emerging-market proxy punished for crisis in any corner of the asset class."