Mining difficulty hits record low and is difficult to recover? Listen to what Bitcoin miners say

This article comes from decrypt, original author: Ekin Genc

Odaily Planet Daily Translator | Moni

Last Sunday (July 4), the difficulty of Bitcoin mining dropped to 14.36 T, the largest drop in history, a drop of 28%; although some people in the market think that the difficulty of mining - one of the most important indicators in the Bitcoin network - may rebound, many miners believe that the network difficulty will not recover soon.

There is no doubt that after Sichuan and other domestic provinces stopped Bitcoin mining, the difficulty of network mining has changed greatly, and the largest drop in history has also occurred. Bitcoin mining difficulty is a measure of the computing power required to verify Bitcoin transactions and the difficulty of obtaining newly mined Bitcoins. The network difficulty is adjusted every two weeks to reflect the degree of competition among miners:

If the mining difficulty is low, it indicates less competition in the market; conversely, if the mining difficulty is high, it indicates competitive incentives among miners.

As we all know, China has always occupied a "dominant position" in the field of Bitcoin mining. Domestic mining computing power accounts for 65% of the total Bitcoin network computing power. Although the total Bitcoin network computing power reached a peak of 198 EH/s on April 15 this year, the situation has changed dramatically since June.

* On June 18, the relevant departments of Sichuan Province issued a notice requiring power generation companies to conduct self-inspection and self-correction, and immediately stop supplying power to virtual currency mining projects, and implement the national cleanup requirements without compromise. The notice also requires that all municipal (prefectural) governments immediately conduct a dragnet investigation, and immediately shut down any virtual currency "mining" projects found in the investigation, and report the cleanup and shutdown situation before June 25. All localities are strictly prohibited from approving virtual currency mining projects under various names.

* On the evening of June 19, several digital currency practitioners revealed that all Bitcoin and other digital currency mining machines in Sichuan were collectively powered off. Data showed that the computing power of several domestic Bitcoin mining pools was declining sharply, and the computing power of the top 10 mining pools fell across the board.

* On June 20, the total computing power of the Bitcoin network fell below 100 EH/s, hitting a nearly 7-month low. The last time the total computing power of the Bitcoin network reached a new low was on November 3, 2020, when the computing power was 87.8228 EH/s.

* On June 21, the total computing power of the Bitcoin network fell again to 88.9964 E, the first time since November 2020. The total computing power of the Bitcoin network fell to 87.8228 E on November 3, 2020, and then remained above 90 E for more than half a year.

* On June 27, the total computing power of the Bitcoin network fell to 61 EH/s, basically returning to the level of 2018.

According to reports, many domestic miners have begun to transfer mining machines overseas on a large scale, or directly sell mining machines to overseas mines. However, it takes time for domestic miners to complete a series of migrations and deployments, and before they find a "new home", Bitcoin miners in other countries may benefit from the reduction in mining difficulty, because it is now easier and cheaper to mine BTC within the Bitcoin network.

Ben Gagnon, chief mining officer at Toronto-based Bitfarms, said other bitcoin miners that continue to operate have received a corresponding amount of market share and therefore receive bitcoin block mining rewards every day.

Peter Wall, CEO of London-based Argo Mining, expressed the same view, adding that while the bitcoin mining market is affected by regulation, Western miners are "taking advantage" of the gap left by Chinese miners, and overall the bitcoin mining market is still booming. Peter Wall said:

“Displaced Chinese Bitcoin miners are searching the globe for suitable hosting locations for their mining equipment, meaning that electricity and mining farm resources have become more valuable than ever in places like North America.”

As the difficulty of Bitcoin mining has dropped significantly, the price of Bitcoin has also shrunk, and has now fallen from its previous high of $64,000 to the $33,000 range. After all, the halving of Bitcoin computing power means that there are not so many computers in the network to provide computing support, thus reducing overall security.

Josh Goodbody, currently the chief operating officer of digital currency custodian Qredo, previously worked in Western countries in charge of mining machine sales. He believes that in the long run, the suspension of Bitcoin mining in provinces such as Sichuan will be beneficial to the development of the industry because it will make the market more decentralized.

The difficulties ahead seem even greater

Frankly speaking, the difficulties may not end soon for the Bitcoin mining industry. Soon, the difficulty of Bitcoin mining will be adjusted again in two weeks. Some Bitcoin miners feel that the next Bitcoin mining difficulty adjustment is unlikely to be as drastic as the one on July 4th - but will it really be like this? According to the forecast data of btc.com, the next Bitcoin mining difficulty adjustment is still likely to see a larger drop, and it is expected to fall to 10.26 T, a drop of 28.58%.

Ben Cannon explains:

“While we may see more Chinese mining machines go offline in the coming weeks, the market impact will be smaller than what we have already seen and will likely be offset by the first batch of Bitcoin mining machines that have already relocated to new facilities. In any case, almost all Chinese mining power has been offline.”

Peter Wall said that Chinese miners hope to return to normal as soon as possible - "For Bitcoin miners who want to relocate to overseas markets, time is of the essence. The reduction in the total network computing power and the subsequent decrease in mining difficulty will not last forever."

At least at this stage, it is difficult to determine when and where domestic Bitcoin mining operators will reinstall their equipment. Ben Cannon found that there are only a handful of places around the world that can match the scale of China's infrastructure. In his words, "No country in the world can operate at the speed of China."

Obviously, digital currencies are still subject to real-world limitations.

This article is translated from https://decrypt.co/75162/bitcoin-mining-records-largest-difficulty-drop-ever-heres-what-miners-say. If reproduced, please indicate the source.