Why Bitcoin Mining Difficulty Still Increases in 'Winter'

 In previous winters of cryptocurrencies, a series of "buffalo plows" covered mats, but this year mining activity is still rampant, causing computing power to continuously increase.

Hashrate (hash rate) is an indicator of the computing power of the mining system in the blockchain network. Miners use powerful computers to process millions of calculations per second and receive Bitcoins. Data from Ycharts shows that as of the night of October 9, the hashrate of the entire Bitcoin network was 272.81 million TH/s (millions of hashes per second), an increase of 2.34% compared to October 8 (266.58 million TH). /s) and increased by 129.9% over the same period last year (118.67 million TH/s). According to Finbold, Bitcoin's hashrate continuously increasing to a record is a surprise because the cryptocurrency market is in a bleak period. Currently, each Bitcoin is trading around $20,000, much lower than the record of $69,000 in November last year.

During the previous Bitcoin winter in 2018, the market saw millions of miners pile up and dust as BTC plummeted. But now, miners are constantly enhancing the machines, making the difficulty of mining soar.

Bitcoin hashrate as of 9/10. Source: Ycharts
Bitcoin hashrate as of 9/10. Source: Ycharts

According to Coin Telegraph, there are three main possible explanations for this strange phenomenon. The first is that the graphics card thirst has ended, the chip supply has been stable, making the price of mining rigs cheaper than last year. Many large-scale miners are willing to spend money and upgrade machines to "compensate" for the period of chip shortage, despite the gloomy signals of the market.

In addition, providers of specialized mining rigs such as Bitmain have also significantly reduced their prices. However, according to calculations, it takes at least 15 months for small miners to pay back, while large-scale miners can "come to shore" a few months earlier if the Bitcoin price stabilizes. The good news for miners is that major crypto company Grayscale has revealed its plans to invest in Bitcoin mining hardware. This could make the price of specialized equipment even more competitive in the future. But the bad news is that the more people join the system, the more difficult it is to mine and the less reward it gets.

The second reason is the open policy of many countries to miners. Although researchers constantly criticize Bitcoin's harm to the environment, many countries still decided to give the green light to miners. Especially after China issued a ban on cryptocurrency mining, many places like Kazakhstan, Canada and Germany welcomed this group of miners. As a result, Bitcoin mining becomes more decentralized, in its original spirit, instead of being overly dependent on China.

However, data from the Cambridge Center for Alternative Finance shows that just three months after the ban in June 2021, Chinese miners have resumed mining on a small scale. Georgia is leading the largest contributor to Bitcoin hash rate with 30.8%,

followed by Texas (11.2%), Kentucky (10.9%) and New York (9.8%).

Regions that contribute a lot to the Bitcoin network hash rate: Source: Telegraph
Regions that contribute a lot to the Bitcoin network hash rate: Source: Telegraph

The final cause comes from the Ethereum overhaul. After the merge, miners could not mine ETH with rigs, so some large miners switched from Ethereum mining to Bitcoin mining.

While the increase in hashrate will help increase network security, the high hash rate is causing miners to worry about the efficiency gained from Bitcoin mining amid the gloomy market.

Popular posts from this blog

Bitcoin miners standing in front of a fork in the road

A Healthy US Bitcoin Mining Industry Could Generate Significant Tax Revenue

Cooperation to remove blockchain difficulties in finance - banking