Even though the DigiByte DigiShield is not a new phenomenon anymore, and even has been installed on Dogecoin, there are still some misunderstandings regarding its functionality. DigiShield was developed as a partial solution for multi-coin switching mining pools. These multipools are a threat to any altcoin with a low difficulty in relation to its network hashrate.
Mining and multipools
The network hashrate represents the total computational power in a network. The network processes new transactions in so-called “blocks” which requires solving computational puzzles referred to a mining. The difficulty of the puzzles adjusts to computational power in the network in order to spread blocks evenly over time, matching a predefined target time. By default, this difficulty would adjust after a certain number of blocks mined. The rise of multipools, however, caused a problem with this process.
Assume a network has a total hashrate of 50 GH/s and a fair difficulty of 500. If a multipool with a hashrate of 50 GH/s would suddenly join the network, the total hashrate would immediately shoot up to 100 GH/s. This would allow many coins to be mined at roughly half of their target time before the difficulty increases. The multipool quickly sells most of the mined coins, causing the price to drop. Once the difficulty finally increases to 100, the multipool leaves and the network is left with only 50 GH/s to tackle the more difficult puzzles. In this example, it would then take roughly double the target time to complete a block and receive new coins, which also decreased in value due to the multipool selling. In extreme cases, this scenario could lead to a blockchain getting “stuck” i.e., not being able to solve a block for extended periods of time.
Effects of DigiShield
DigiShield adjusts the difficulty of a coin between blocks, or every 60 seconds in the case of DigiByte and Dogecoin. This is very effective in preventing long times to solve a block, although it does not prevent a coin from being a profitable target for multipools as still believed by some. Assume the coin in the previous example has a block target time of 60 seconds and an equal difficulty retargeting time. If the multipool joins when the network retargets to a low difficulty, the time to solve a block still halves to roughly 30 seconds. The multipool could thus mine one or two blocks before the difficulty adjusts again. This cycle would simply repeat more often, as the coin remains a relatively more profitable target when the difficulty is low. Profitability is only slightly reduced due to the fact that it will not be possible to get many coins in a single run, but by far the main benefit of DigiShield is a better balance in block solving times.