diff --git a/libethcore/BlockInfo.cpp b/libethcore/BlockInfo.cpp
index 1f845ad20..4c71353d6 100644
--- a/libethcore/BlockInfo.cpp
+++ b/libethcore/BlockInfo.cpp
@@ -166,7 +166,7 @@ u256 BlockInfo::calculateDifficulty(BlockInfo const& _parent) const
 	if (!parentHash)
 		return c_genesisDifficulty;
 	else
-		return timestamp >= _parent.timestamp + 42 ? _parent.difficulty - (_parent.difficulty >> 10) : (_parent.difficulty + (_parent.difficulty >> 10));
+		return timestamp >= _parent.timestamp + 9 ? _parent.difficulty - (_parent.difficulty >> 10) : (_parent.difficulty + (_parent.difficulty >> 10));
 }
 
 void BlockInfo::verifyParent(BlockInfo const& _parent) const
diff --git a/libethcore/Exceptions.h b/libethcore/Exceptions.h
index 475ab1f05..9fb80d8c6 100644
--- a/libethcore/Exceptions.h
+++ b/libethcore/Exceptions.h
@@ -20,7 +20,8 @@ class InvalidBlockFormat: public Exception { public: InvalidBlockFormat(int _f,
 class InvalidBlockHeaderFormat: public Exception { public: InvalidBlockHeaderFormat(int _f, bytesConstRef _d): m_f(_f), m_d(_d.toBytes()) {} int m_f; bytes m_d; virtual std::string description() const { return "Invalid block header format: Bad field " + toString(m_f) + " (" + toHex(m_d) + ")"; } };
 class InvalidUnclesHash: public Exception {};
 class InvalidUncle: public Exception {};
-class UncleNotAnUncle: public Exception {};
+class UncleTooOld: public Exception {};
+class UncleInChain: public Exception {};
 class DuplicateUncleNonce: public Exception {};
 class InvalidStateRoot: public Exception {};
 class InvalidTransactionsHash: public Exception { public: InvalidTransactionsHash(h256 _head, h256 _real): m_head(_head), m_real(_real) {} h256 m_head; h256 m_real; virtual std::string description() const { return "Invalid transactions hash:  header says: " + toHex(m_head.ref()) + " block is:" + toHex(m_real.ref()); } };
diff --git a/libethereum/BlockChain.cpp b/libethereum/BlockChain.cpp
index 842343480..06117c01b 100644
--- a/libethereum/BlockChain.cpp
+++ b/libethereum/BlockChain.cpp
@@ -386,6 +386,20 @@ void BlockChain::checkConsistency()
 	delete it;
 }
 
+h256Set BlockChain::allUnclesFrom(h256 _parent) const
+{
+	// Get all uncles cited given a parent (i.e. featured as uncles/main in parent, parent + 1, ... parent + 5).
+	h256Set ret;
+	h256 p = _parent;
+	for (unsigned i = 0; i < 6 && p != m_genesisHash; ++i, p = details(p).parent)
+	{
+		ret.insert(sha3(RLP(block(p))[0].data()));
+		for (auto i: RLP(block(p))[2])
+			ret.insert(sha3(i.data()));
+	}
+	return ret;
+}
+
 bytes BlockChain::block(h256 _hash) const
 {
 	if (_hash == m_genesisHash)
diff --git a/libethereum/BlockChain.h b/libethereum/BlockChain.h
index d13ef7614..8fcf09691 100644
--- a/libethereum/BlockChain.h
+++ b/libethereum/BlockChain.h
@@ -107,6 +107,11 @@ public:
 	/// Get the hash of a block of a given number. Slow; try not to use it too much.
 	h256 numberHash(unsigned _n) const;
 
+	/// Get all blocks not allowed as uncles given a parent (i.e. featured as uncles/main in parent, parent + 1, ... parent + 5).
+	/// @returns set including the header-hash of every parent (including @a _parent) up to and including generation +5
+	/// togther with all their quoted uncles.
+	h256Set allUnclesFrom(h256 _parent) const;
+
 	/// @returns the genesis block header.
 	static BlockInfo const& genesis() { UpgradableGuard l(x_genesis); if (!s_genesis) { auto gb = createGenesisBlock(); UpgradeGuard ul(l); (s_genesis = new BlockInfo)->populate(&gb); } return *s_genesis; }
 
diff --git a/libethereum/State.cpp b/libethereum/State.cpp
index 105c725f6..7b46228b4 100644
--- a/libethereum/State.cpp
+++ b/libethereum/State.cpp
@@ -390,7 +390,7 @@ u256 State::enactOn(bytesConstRef _block, BlockInfo const& _bi, BlockChain const
 	sync(_bc, _bi.parentHash);
 	resetCurrent();
 	m_previousBlock = biParent;
-	return enact(_block, biGrandParent);
+	return enact(_block, &_bc);
 }
 
 map<Address, u256> State::addresses() const
@@ -499,7 +499,7 @@ h256s State::sync(TransactionQueue& _tq, bool* o_transactionQueueChanged)
 	return ret;
 }
 
-u256 State::enact(bytesConstRef _block, BlockInfo const& _grandParent, bool _checkNonce)
+u256 State::enact(bytesConstRef _block, BlockChain const* _bc, bool _checkNonce)
 {
 	// m_currentBlock is assumed to be prepopulated and reset.
 
@@ -558,16 +558,21 @@ u256 State::enact(bytesConstRef _block, BlockInfo const& _grandParent, bool _che
 	// Check uncles & apply their rewards to state.
 	set<h256> nonces = { m_currentBlock.nonce };
 	Addresses rewarded;
+	set<h256> knownUncles = _bc ? _bc->allUnclesFrom(m_currentBlock.parentHash) : set<h256>();
 	for (auto const& i: RLP(_block)[2])
 	{
 		BlockInfo uncle = BlockInfo::fromHeader(i.data());
-
-		if (m_previousBlock.parentHash != uncle.parentHash)
-			throw UncleNotAnUncle();
 		if (nonces.count(uncle.nonce))
 			throw DuplicateUncleNonce();
-		if (_grandParent)
-			uncle.verifyParent(_grandParent);
+		if (_bc)
+		{
+			BlockInfo uncleParent(_bc->block(uncle.parentHash));
+			if ((bigint)uncleParent.number < (bigint)m_currentBlock.number - 6)	// TODO: check 6. might be 7 or something...
+				throw UncleTooOld();
+			if (knownUncles.count(uncle.hash))
+				throw UncleInChain();
+			uncle.verifyParent(uncleParent);
+		}
 
 		nonces.insert(uncle.nonce);
 		tdIncrease += uncle.difficulty;
@@ -651,7 +656,7 @@ bool State::amIJustParanoid(BlockChain const& _bc)
 		cnote << "PARANOIA root:" << s.rootHash();
 //		s.m_currentBlock.populate(&block.out(), false);
 //		s.m_currentBlock.verifyInternals(&block.out());
-		s.enact(&block.out(), BlockInfo(), false);	// don't check nonce for this since we haven't mined it yet.
+		s.enact(&block.out(), &_bc, false);	// don't check nonce for this since we haven't mined it yet.
 		s.cleanup(false);
 		return true;
 	}
@@ -694,6 +699,7 @@ void State::commitToMine(BlockChain const& _bc)
 
 	if (m_previousBlock != BlockChain::genesis())
 	{
+		// TODO: find great-uncles (or second-cousins or whatever they are) - children of great-grandparents, great-great-grandparents... that were not already uncles in previous generations.
 		// Find uncles if we're not a direct child of the genesis.
 //		cout << "Checking " << m_previousBlock.hash << ", parent=" << m_previousBlock.parentHash << endl;
 		auto us = _bc.details(m_previousBlock.parentHash).children;
@@ -1181,8 +1187,8 @@ void State::applyRewards(Addresses const& _uncleAddresses)
 	u256 r = m_blockReward;
 	for (auto const& i: _uncleAddresses)
 	{
-		addBalance(i, m_blockReward * 3 / 4);
-		r += m_blockReward / 8;
+		addBalance(i, m_blockReward * 15 / 16);
+		r += m_blockReward / 32;
 	}
 	addBalance(m_currentBlock.coinbaseAddress, r);
 }
diff --git a/libethereum/State.h b/libethereum/State.h
index c8fd27e01..c605ce42e 100644
--- a/libethereum/State.h
+++ b/libethereum/State.h
@@ -299,9 +299,9 @@ private:
 	/// Commit all changes waiting in the address cache to the DB.
 	void commit();
 
-	/// Execute the given block, assuming it corresponds to m_currentBlock. If _grandParent is passed, it will be used to check the uncles.
+	/// Execute the given block, assuming it corresponds to m_currentBlock. If _bc is passed, it will be used to check the uncles.
 	/// Throws on failure.
-	u256 enact(bytesConstRef _block, BlockInfo const& _grandParent = BlockInfo(), bool _checkNonce = true);
+	u256 enact(bytesConstRef _block, BlockChain const* _bc = nullptr, bool _checkNonce = true);
 
 	// Two priviledged entry points for the VM (these don't get added to the Transaction lists):
 	// We assume all instrinsic fees are paid up before this point.