Bitcoin Mining Difficulty Drops Significantly As Hash Rate Continues To Fall
Since its peak in August, Bitcoin’s hash rate have observed a steady and significant drop. One key reason is the crashing markets, that has pushed the less stable miners to shut down. The subsequent decline in hash rate is creating controversy regarding specialized mining rigs and the state of the crypto market.
According to blockchain.com, currently, the hash rate is around 37.7 EH/s (3.7 E19 hashes per second), 30% lower than its peak in August. A significant drop in difficulty rate, 15.1 % has been observed, marking the second largest drop in difficulty rate of all time after the 18% drop recorded in January 2011.
Bitcoin (BTC) isn’t directly affected by the drop in hash rate due to its in-built difficulty adjustment aspect. In order to mine BTC, computing hardwares are employed to solve complex mathematical equations. Approximately every two weeks, the difficulty level of these equations are adjusted according to new or departing miners from the pool. The adjustment is done to keep a consistent block writing time (about 10 minutes) and a regular flow of new Bitcoin creation.
The cost of producing a new Bitcoin is estimated to be around $4,500 including the cost of mining hardware and electricity involved. Since the prices have stepped under the $4,000 mark once again, the continued lack of profitability is hurting miners across the globe and forcing them to close shop. A recent research suggested that almost 100,000 BTC miners have had shut down due to plunging prices
Thousands of ASIC miners are being sold by the pound in China as it no longer aiding miners. F2Pool Founder Mao Shixing recently shared a picture of this scenario on his Twitter account. Notably, the ASIC miners serve no other functions besides mining cryptocurrencies. So expect potential ramifications soon, in regards to the wasted capital and this e-waste. Decreasing profitability is either pushing companies to shift their strategies or to shut down. Giga Watt, the bitcoin mining firm declares bankruptcy owing millions to creditors.
The Negative Aspect
While some miners are cracking under pressure and are closing down, others are somewhat experiencing profits as the competition, hash rate and the difficulty level recedes. This is a worrisome situation as it will lead to centralization of mining power and hash rate affecting the decentralized feature of BTC.
Concentrations of hash rate can render BTC under the risk of 51% attack that would allow the hash rate controller to write their own, separate blockchain with altered transactions and fees. The only silver lining that surrounds the dark cloud is that BTC mining still manages to intrigue miners and have observed a steady increase even in the bear market. Just last month, Paraguay revealed its plans to build the world’s largest bitcoin mining farm.
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