Optimizing Transaction Fees in Blockchain Systems: A Dynamic Incentive Approach

Bitcoin’s success depends on its ability to maintain a consistent level of mining competition. To achieve this, the network adjusts the difficulty of mining every two weeks based on the time it takes to find a new block. This process is critical for preventing any single miner from gaining an unfair advantage and ensuring that the Blockchain remains secure.
Imagine a group of people trying to solve a complex puzzle together. The puzzle represents the challenge of finding a new block in the Bitcoin network, and it takes a certain amount of time (represented by the "interval") to solve it. To make the puzzle more challenging or easier, the group needs to adjust the number of people working on it (represented by the "block size"). This adjustment ensures that the group can find a new block within a certain time frame (represented by the "fork rate").
To calculate the appropriate difficulty level, the network uses an formula that takes into account factors such as the expected number of hashing calculations needed for a newly mined block (represented by the "hash rate") and the current network latency. This ensures that the difficulty level is consistent across all nodes in the network and prevents any one node from gaining too much control over the Blockchain.
In summary, Bitcoin’s difficulty adjustment mechanism helps maintain a consistent level of mining competition by adjusting the difficulty of finding new blocks every two weeks based on factors such as the expected number of hashing calculations and current network latency. This ensures that the network remains secure and prevent any single miner from gaining too much control over the Blockchain.