Mining speed has been reduced by half, and Bitcoin will usher in the largest difficulty reduction in history

Bitcoin’s mining difficulty, which determines how hard it is for miners to solve the cryptographic puzzles needed to mine new blocks, is expected to see its biggest drop ever in the upcoming adjustment.

Multiple on-chain data sites estimate that Bitcoin’s mining difficulty will drop by about 21% in the upcoming adjustment, which will occur at block height 689,472, or about five days from press time. This would be the largest difficulty drop in Bitcoin’s history and the first time the Bitcoin network has seen three consecutive difficulty drops since December 2018. The mining difficulty metric dropped by 16% and 5% in the previous two adjustments (on May 30 and June 14 of this year), respectively.

Bitcoin’s mining difficulty is designed to adjust every 2,016 blocks based on the total computing power on the entire network. The average computing power of Bitcoin, the world’s largest blockchain by market value, has dropped from 142 exahash per second (EH/s) on June 14 to just under 100 EH/s now.

The hashing power deployed on the network determines how long it takes to produce a block - according to the network rules, this process should take 10 minutes. If the block production speed is slower than 10 minutes, the network will increase the difficulty. On the other hand, if a large number of mining machines are offline, the block production time will increase, and the network difficulty will be reduced.

Since the last adjustment on June 14, the average block production interval of the Bitcoin network has been about 12.9 minutes - nearly 30% slower than the expected 10-minute interval per block.

The overall decline in difficulty and hashrate since the start of the month reflects the impact of mining farm closure orders issued by the Chinese government in Xinjiang and Sichuan, two regions that until recently were two of the world’s largest mining hubs.

After the next adjustment, Bitcoin miners who remain plugged in and unaffected by China’s regulatory situation will receive a larger share of mining rewards — proportional to the drop in difficulty.

Millions of ASIC miners unplugged

Since the Xinjiang and Sichuan provincial governments ordered power cuts to Bitcoin mining farms on June 9 and June 18, respectively, the Bitcoin network’s hashrate has dropped by about 70 EH/s. Over the past month, it has fallen by nearly 50%.

This also means that millions of Bitcoin ASIC miners have been unplugged from the network and are now either looking to change hands or waiting to be transferred elsewhere. The current surge in supply in the second-hand mining machine market has even prompted Bitmain to suspend its global sales of spot orders.

The Ethereum network’s hash rate has also taken a hit, falling 20% ​​since the beginning of the month.

Meanwhile, mining farms outside of China have seen an influx of new miners following the implementation of regulations in Xinjiang and Sichuan.

“The increase in demand for our renewable energy hosting services has become more dramatic following the sudden global interest in green Bitcoin mining following the Chinese government’s announcement of a crackdown on mining,” said Igor Runets, founder and CEO of BitRiver, a Russian Bitcoin mining hosting provider.

Runets said that shortly after the Sichuan government issued the order, BitRiver signed a contract with a Chinese mining customer for 150 megawatts of hosting capacity, which will be fully operational within four months. But he believes that the current global supply shortage of hosting availability will make it difficult to meet the new demand from Chinese miners in the short term.

In fact, in Xinjiang alone, nearly 2,000 megawatts of total Bitcoin mining capacity has been shut down (June 9).

“Given the tight supply in the hosting industry for Bitcoin miners and the time it takes to build new mining facilities or deploy new machines, I don’t think hashrate will recover anytime soon,” Runets said.

The sharp drop in computing power caused the Bitcoin network's block speed to drop sharply

According to our analysis of blockchain data, in the past 24 hours, only half of the 144 Bitcoin blocks that were previously mined per day can now be mined.

At the time of writing, the last block height was 688,969. Exactly 24 hours ago, the block height was 688,892, and only 77 blocks have been mined.

This is of course to be expected, as the hashrate of the Bitcoin network has plummeted, and difficulty adjustments have a fixed periodicity, so there is no immediate response, resulting in a slowdown in block production.

This is the first time since Bitcoin was invented in 2009 that only 77 blocks have been found in a day, and there have been reports that only 73 blocks were mined in 24 hours.