Bitcoin’s mining difficulty fell 28 percent on Saturday morning, the largest drop in cryptocurrency in modern history. The event was the result of the migration of miners outside of China, where a huge number of mining centers are concentrated.
We are talking about almost 65 percent of the total hashrate of the Bitcoin network, that is, the computing power of the blockchain. This phenomenon of unprecedented scale has attracted the attention of almost all cryptocurrency enthusiasts.
The Chinese government decided to create problems for the large Bitcoin miners shortly after Tesla stopped accepting cryptocurrency due to its unsustainable mining. At the same time, Ilon Musk undertook to criticize BTC, whose reputation among the cryptocurrency community quickly deteriorated in just a few weeks.
As a result, the miners began to turn off their equipment and look for regions to relocate. The disconnection affected the hash rate, which in turn affected the speed of block mining – after all, the fewer miners with a fixed difficulty, the slower the block solution is found.
As a result, the difficulty of mining BTC decreased by 27.94 percent – from 19.93 T to 14.36 T. Thus, the cryptocurrency network regulates the time for creating one block, which should be equal to 10 minutes. Thanks to this, new coins that are created as a reward for miners do not appear in circulation too quickly.
Since the drop in difficulty and hash rate were large-scale, representatives of the blockchain community reacted to the event. Here is their attitude to the situation.
Why did Bitcoin’s hashrate fall?
On April 15, Bitcoin’s hash rate peaked at 198 exahashes per second. Two months later, the indicator dropped to 89 exahashes per second, that is, it sank more than twice. The local minimum of the indicator was recorded on June 28: then the hash rate was at 66 exahashes per second.
The collapse in difficulty was good news for all other miners, since the fall in difficulty made it easier to mine cryptocurrency – and this increased earnings. This is exactly what is happening, commented on the head of the Canadian mining center Ben Gagnon. Here is his quote, in which the expert shares his attitude to the situation. The cue is from Decrypt.
All other miners that continue to operate receive a commensurate market share and therefore large daily block rewards.
This is influenced by two factors. First of all, the mentioned complexity, the fall of which simplifies the very process of finding blocks, the extraction of which brings a fixed reward in the form of 6.25 BTC per block. In addition to this, the drop in difficulty made the block creation time faster: it was 13 minutes 53 seconds before the last drop of the parameter instead of the base 10 minutes. This means that miners are not only getting the same reward for less work, but they are doing it much faster than in the past few weeks.
Note that the mining of the last batch of 2016 blocks, after which the difficulty is recalculated, due to the drop in the hash rate, took not the standard two weeks, but twenty days.
Gagnon also did not forget to mention the next recalculation of the difficulty, which will take place approximately in two weeks. True, this time he expects a smaller drop in the indicator.
Although in the next few weeks in China there will still be disconnections of equipment, there is not much of it left in the field, plus this decrease in hashrate is partially offset by the inclusion of the first miners who have already moved to a new location. Almost all mining centers in the PRC have already been shut down.
This means that the expert assumes that the fall will not be the last in the coming weeks, but we will not see anything similar in scale. At least until the next big shock in the cryptocurrency industry.
Peter Wall, CEO of London-based Argo Mining, said that while miners in the West are trying to capitalize on the fall in complexity, the pursuit of electricity and ASIC space is booming.
The displaced Chinese miners are looking around the world for the right regions for their machines, which means that in places like North America, energy and space are increasing in value like never before.
Wall noted that time is now the most valuable resource for Chinese miners. Because they want to get back into business as soon as possible.
For miners moving to a new location, time is money. The hash rate drop and the difficulty hole won’t last long.
However, the problems have not disappeared – before that, there were so many miners in China that the rest of the world will have to create a large-scale infrastructure to accommodate them. That is, the difficulties caused by pressure from the PRC government will affect the cryptosphere for at least several more months. Let us remind you that according to the calculations of other specialists, the final stabilization of the situation on the market may take place no earlier than October. Although the author of this theory admits its possible inaccuracy.
We believe that the ban on cryptocurrency mining in China will have a good impact on Bitcoin in the future. The BTC mining industry will become more decentralized, and its concentration will not be reduced to just one country on the map. Accordingly, the opportunities for creating problems for one government will be much less – as well as the weaknesses of the cryptocurrency.