After the first adjustment after Halving, Bitcoin's mining difficulty is reduced by 6%, which means mining BTC is now a little bit easier. The adjustment could offset profit margins for some miners.
Bitcoin's mining difficulty, an indicator of competition among miners of the main
cryptocurrency, has decreased by 6%. After the first difficulty adjustment after Halving last week, it's now a bit easier to mine Bitcoin.
The recent reduction in mining difficulty could encourage many of the miners who were forced to shut down their operations due to reduced block rewards to return to the grid. However, due to a growing trend for mining difficulty over the years, as well as other factors, it is expected to increase again in the coming weeks.
Bitcoin mining difficulty reduced 6%
Mining difficulty is part of an automatic procedure that takes place in the chain of blocks of Bitcoin every 2,016 blocks. That is, approximately every 14 days, which guarantees that the average time between the production of each block remains in 10 minutes.
This mechanism helps to keep the Blockchain network running smoothly., guaranteeing a balance between the production of new blocks and security.
As reported by Glassnode on Tuesday, the mining difficulty was reduced by 6% and is currently set at 15.14 trillion. The figure compares with its record high 16.55 trillion recorded in March. After the Halving of Bitcoin, reducing the block reward from 12.5 to 6.25, a drop was expected in the mining difficulty. This is the third difficulty setting so far this year.
Bitcoin hashrate also falls
Another key metric of Bitcoin mining activity, the hashrate or processing power of the Bitcoin network, has also declined. According to TheBlock, hash levels have dropped by 25%.
Prior to Halving, mining activity levels increased, possibly motivated by lower-powered device operators interested in deriving profits before halving rewards. However, a recent decrease in hashrate assumes that many of these miners operating with older generation equipment have gone offline after the reduction.
Thomas Heller, global commercial director of the mining pool, F2Pool, shared his opinion of this movement on the network with TheBlock:
Miners are adjusting to new block rewards after halving, and now we've seen Bitcoin's hashrate drop from around 125 EH / s [exahash per second] halve to around 90 EH / s now. Most of the hashrate crash came from machines from previous generations in China, however miners around the world have been affected.
Faced with this scenario, a fall in mining competition could be very useful for those miners who are still operating with more efficient equipment. Also, a drop in mining difficulty theoretically favors miners who have remained in the game. With less competition from the miners who have had to withdraw due to the cut in profit margins.
Profitability for miners
However, according to Coindesk, the drop in mining difficulty can also make obsolete equipment profitable again. Following data Coin Metrics, many computers Bitcoin mining Antminer S9 of Bitmain, which saw its heyday in 2018, came back on in response to the recent rise in prices above EUR € 9,000.
While Halving made these teams less profitable, the drop in mining difficulty could offset profit margins. It should be noted that the S9 are available at very low prices in the secondary market, between EUR € 20 and € 80.
However, this compensation in profit margins would only become really effective if the price of Bitcoin experienced a significant increase. Well, otherwise, an upcoming increase in competition and mining difficulty would quickly wipe out those gains.
But another factor could cause many of the older mining machines to return to the game. In China, the hydroelectric season is expected to start around May 25, causing electricity to become cheaper.
In the opinion of Heller and Alejandro De La Torre, vice president of the Poolin pool, the " rainy season will undoubtedly increase hashrate in the short and medium term ". The director of F2Pool added: " Assuming that the price of Bitcoin remains stable, we expect the hashrate of the network to increase in the coming weeks."
Mining difficulty will increase again
According to different analyzes, it is likely that for the next difficulty adjustment, which will take place in about 15 days, the mining difficulty can be further reduced. However, for Coindesk analysts, this drop is an abnormality within what has been the long-term trend for the Bitcoin network.
Over the years, the mining business has become larger and more competitive. This competition has fueled a growing trend of computational power on the net, which is why Bitcoin's mining difficulty has almost always increased.
That does not mean that there have been no declines in the past. For example, in late 2018, after up to 800,000 miners shut down their rigs following drastic price drops, the mining difficulty declined.
However, today the mining difficulty is still more than double what it was for this date last year, a sign of how competitive the mining business has become. Put simply, negative tweaks don't happen often, and according to CoinDesk Zack Voell's calculations, there have only been 49 in the protocol's history.
Falling mining difficulty could also adjust rates
Lastly, it should be noted that adjusting the difficulty of Bitcoin mining could also have an effect on BTC transaction fees, causing its reduction. Without a doubt, it would be a valuable fit for users of cryptocurrencies.
Especially, considering that transaction fees on the Bitcoin network have increased by more than 1,300% since the beginning of 2020. At the time of writing this article, the average transaction fee for Bitcoin is EUR € 6, according to data from Bitinfocharts.