Bitcoin mining difficulty is increasing sharply as large mining pools resume after a hiatus.
Follow CNBC, the difficulty of Bitcoin mining activity spike in recent times is something that has been predicted. After the Chinese government’s ban, Bitcoin mining pools in this country are gradually finding “new homes” in many other places.
The difficulty of Bitcoin operations is increasing rapidly. Photo: Bloomberg.
On the morning of August 13, Bitcoin automated scripts increased the difficulty of mining by 7.3%. Bitcoin’s algorithm is automatically reset every 2,016 blocks or every 2 weeks to adjust according to the overall mining power of the network.
“Hashrate is still down 42.1% from its peak in May, at the beginning of the exodus of mining centers in China,” said Jason Deane, an analyst at the company. Cryptocurrency consulting firm Quantum Economics said.
However, miners are still making more money than before the Chinese government ban.
Bitcoin Algorithms Constantly Adjusting
When China banned Bitcoin mining, more than half of the computing power in the system disappeared. This means that it takes more time to be able to transact and create a new Bitcoin.
As a result, Bitcoin’s algorithms have self-corrected for this difference in order to make mining easier. During July, the difficulty in the Bitcoin system saw a sharp drop of 28%, unprecedented.
Bitcoin becomes easier to mine after mining centers in China shut down. Photo: Bloomberg.
Bitcoin’s difficulty adjustment feature is an important part of its structure. Even when miners in China, which accounts for 54% of the world’s total hashrate, shut down, the algorithms immediately adjust to ensure balance.
“There isn’t any downtime for the Bitcoin system. The difficulty adjustment is really the smartest part of the system,” said Bitcoin mining engineer Brandon Arvanaghi.
This entire sequence of events is seen as a “black swan” phenomenon for the cryptocurrency mining industry. According to miner Alejandro de la Torre, this event also gives many already rich people the opportunity to earn more money.
However, Mr. Deane of the consulting firm Quantum Economics asserts that profits will be 7.3% lower when Bitcoin mining has a new adjustment.
“Assuming energy costs and hashrate remain unchanged, the calculation will be really as simple as it first appears,” Deane replied. CNBC.
A Bitcoin mining pool in Texas (USA). This is where the capital of Chinese mine owners poured in, after the country’s government banned Bitcoin mining. Photo: Rest of World.
The difficulty adjustment also reflects the fact that the global hashrate in the mining sector has bottomed out. That is also part of the reason why miners quickly returned from the end of June.
“We have seen the bottom of the hashrate drop, and from now on that number can only increase. This subsequent adjustment reflects the fact that miners are increasing their capacity and using more new machines. There is a huge amount of machinery from China that needs to be reused,” said Mike Colyer, CEO of crypto firm Foundry.
Rebuild Bitcoin Mining System
After the ban in China, countless mining machines have stopped working. Most of them will be resold to other countries.
“Most of the people who used to mine Bitcoin in China couldn’t move to the US because of capital constraints, didn’t speak English, or had never left the Sichuan region in their entire lives. They decided to sell all their machines instead,” explained De La Torre, vice president of the Poolin mining pool.
Countless Bitcoin Miners Resold After China Ban. Photo: Coindesk.
However, these old “buffalo plows” are very unlikely to be reused in other countries. In fact, many in the mining industry predict that the new devices will be more efficient, making Bitcoin mining easier.
“Newer machines have significantly higher hashrates than their predecessors, so we will likely see hashrate continue to fall back to all-time highs over the next 12 months,” said Whit Gibbs, Director. mining company Compass said.
This also means that the competition among miners will be very fierce. Colyer said the system’s difficulty is expected to increase by more than 10% per month from this point forward. In addition, it is likely to double in about 9-12 months.
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