Difficulty Adjustment Algorithm

In order to correct for changes in the Bitcoin Cash network's total hashing power (i.e. as hardware improves or nodes are added to or removed from the network), the amount of work required to mine a block must change in tandem. Bitcoin Cash solves this by adjusting the difficulty according to an algorithm that looks at recent block timestamps, infers the hashing power that led to those timestamps, and adjusts the difficulty for future blocks accordingly.

The current Bitcoin Cash difficulty adjustment algorithm attempts to ensure that the difficulty of new blocks is always closely tied to recent block difficulties. Put into place as a part of HF-20171113, it performs the following calculation to determine the difficulty of a block, Bn+1, with block height n+1:

In other words, for any given block the projected work is be equal to the difference in chainwork multiplied by an adjustment. The adjustment is 600 seconds (the goal timeframe for a block to be mined) divided by the difference in timestamps between the median block (by timestamp) of its prior three immediate ancestors and its 144th, 145th, and 146th ancestors (bounded by 72 * 600 and 288 * 600). The projected work is then converted into the target by subtracting it from 2256 and then dividing the result by the projected work. Then minimum of that calculated value and the maximum target is then used as the target for that block.

Legacy Difficulty Adjustment Algorithm

Prior to BCH-UAHF, the original Bitcoin difficulty adjustment algorithm was used. To determine the difficulty of a block, Bn+1, with block height n+1:

This boils down to a possible change in difficulty every 2016 blocks, where the new target (for the next 2016 blocks) is calculated by dividing the time taken for the last 2015 blocks by the time expectation for 2016 blocks (bounded by 0.25 and 4) and multiplying that ratio by the existing target.

Emergency Difficulty Adjustment Algorithm

As a part of BCH-UAHF, due to the anticipated decrease in hashing power, the following adjustment to the legacy difficulty adjustment algorithm above was put into place:

In case the MTP of the tip of the chain is 12h or more after the MTP 6 block before the tip, the proof of work target is increased by a quarter, or 25%, which corresponds to a difficulty reduction of 20% .

RATIONALE: The hashrate supporting the chain is dependent on market price and hard to predict. In order to make sure the chain remains viable no matter what difficulty needs to adjust down in case of abrupt hashrate drop.

That is, if the block height is not divisible by 2016, the target may still be adjusted if the current MTP is more than 12 hours after the MTP from 6 blocks prior. In this case, the target is multiplied by 1.25.

This algorithm was superseded by the current difficulty adjustment algorithm as a part of HF-20171113.