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The main reason to manually set difficulty is to prevent stale shares and wasted work.Every minute, on average, P2Pool works on a new share block. Once the pool starts working on a new share block it will request that every miner restarts their workload. The miner will attempt to comply and if it doesn't comply quickly enough the miner will complete the old workload, submit it, and it will be considered stale. So in the end that partial workload is wasted. For miners with low hash rates difficulty can get high enough that they will never complete their workload before the pool starts working on a new share block which will result in them submitting only stale shares or none at all. All of us we are trying to minimize the time our miners are working on workloads that won't be completed or submitted as stale.
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