Updating Consensus

Avoiding double spends, confusion, forks, and attacks, aren't the only complexities of a decentralized consensus mechanism, what happens when you want to update the consensus rules? How to you change a protocol that no one controls? In the last part of Chapter 10 we'll read through the various mechanisms for updating the the Bitcoin code and consensus rules. Read the Chapter 10 from "Changing the Consensus Rules" till the end. 

Diverging Miners and Difficulty

As miners diverge into mining two different chains, the hashing power is split between the chains. The mining power can be split in any proportion between the two chains. The new rules may only be followed by a minority, or by the vast majority of the mining power.

Let's assume, for example, an 80%–20% split, with the majority of the mining power using the new consensus rules. Let's also assume that the fork occurs immediately after a retargeting period.

The two chains would each inherit the difficulty from the retargeting period. The new consensus rules would have 80% of the previously available mining power committed to them. From the perspective of this chain, the mining power has suddenly declined by 20% vis-a-vis the previous period. Blocks will be found on average every 12.5 minutes, representing the 20% decline in mining power available to extend this chain. This rate of block issuance will continue (barring any changes in hashing power) until 2016 blocks are mined, which will take approximately 25,200 minutes (at 12.5 minutes per block), or 17.5 days. After 17.5 days, a retarget will occur and the difficulty will adjust (reduced by 20%) to produce 10-minute blocks again, based on the reduced amount of hashing power in this chain.

The minority chain, mining under the old rules with only 20% of the hashing power, will face a much more difficult task. On this chain, blocks will now be mined every 50 minutes on average. The difficulty will not be adjusted for 2016 blocks, which will take 100,800 minutes, or approximately 10 weeks to mine. Assuming a fixed capacity per block, this will also result in a reduction of transaction capacity by a factor of 5, as there are fewer blocks per hour available to record transactions.