How Does the Concept of a “Difficulty Bomb” in Some Blockchains Affect Mining Pool Strategy?
A "difficulty bomb" is a mechanism in some blockchains (like Ethereum's former Proof-of-Work) that periodically and exponentially increases the network difficulty. This makes mining progressively harder, eventually rendering it unprofitable, forcing a network transition (e.g. to Proof-of-Stake).
A pool operator's strategy must account for this, preparing for the eventual cessation of mining operations or migrating to a different, fork-off chain.
Glossar
Blockchains
Architecture ⎊ A blockchain represents a distributed, immutable ledger structured as a chain of cryptographically linked data blocks, validated and maintained by a decentralized network of nodes.
Mining Pool
Consensus ⎊ Mining pools represent a collaborative effort among network participants to aggregate computational resources, increasing the probability of successfully mining blocks and earning associated rewards within a Proof-of-Work cryptocurrency system.
Difficulty Bomb
Concept ⎊ A difficulty bomb is a pre-programmed mechanism in some Proof of Work blockchains designed to gradually increase mining difficulty to an impossibly high level.
Cessation of Mining Operations
Economics ⎊ The cessation of mining operations typically occurs when the cost of production, primarily electricity and hardware depreciation, exceeds the value of block rewards and transaction fees.