After the strong regulation of mining industry: transaction demand dropped to the lowest point in 34 months, and the world's top mining pools have strong risk resistance

Analyst | Carol Editor | Tong Producer | PANews

According to the electricity consumption index calculated by the Alternative Finance Research Center at the University of Cambridge, as of June 21, the estimated annual energy consumption of Bitcoin mining is about 91.04 TW/h, which is higher than the estimated energy consumption scale of Finland and Belgium, and is comparable to the estimated energy consumption scale of Kazakhstan. High energy consumption not only puts pressure on energy demand, but also high carbon emissions will have an impact on the environment.

In this context, in conjunction with the goals of carbon neutrality and carbon peak, the Chinese government has recently strengthened its Bitcoin mining regulatory policy. Xinjiang, Inner Mongolia, Sichuan, Gansu and other former major virtual currency mining cities in China have issued documents announcing the ban on virtual currency mining, including Bitcoin mining. On June 20, the total Bitcoin network computing power fell to 91EH/s, a six-month low. PAData further analyzed the recent changes in Bitcoin computing power and on-chain data and found that:

1) In the past month, the average daily computing power of the entire Bitcoin network has dropped significantly, with a drop of about 28.53%. In June, the average daily computing power dropped to the lowest level of the year, but it was still higher than any month in the past three years.

2) The computing power share of mining pools with Chinese backgrounds has fluctuated, with some declining significantly. For example, the average computing power share of 1THash, Huobi.pool, and F2Pool in the past week has dropped by more than 40% compared with the average computing power share of last month, but BTC.com and Binance Pool still have an increase of more than 10%, and ViaBTC has increased by more than 56%.

3) Affected by the decline in computing power, the difficulty of Bitcoin mining has been reduced three times since May, which is the most frequent short-term reduction in the past three years.

4) The block time of the Bitcoin network has increased significantly recently, with an average increase of 1.96% in the first four months of this year, and an increase of 5.29% from June to now. At the same time, the average monthly block volume of the Bitcoin network has dropped to the lowest value since November 2018.

5) Currently, Bitcoin's on-chain activity has significantly decreased, and the number of on-chain transactions has dropped to the lowest level since August 2018. However, from the overall trend, the number of on-chain transactions has decreased this year, but the computing power has still increased slightly. This relative change means that the impact of the short-term computing power decline on the actual operation of the network may be less than expected.

The average computing power this month dropped to the lowest level of the year.

The hashrate share of each mining pool varies

Since mid-May, the average daily hashrate of the Bitcoin network has shown a significant downward trend. The hashrate on June 15 (the average of the last 7 days, referred to as MA7 below) has fallen to 129.10 EH/s, a decrease of about 28.53% from the peak of 180.63 EH/s on May 13, and the longest period of continuous decline this year. As of June 20, the hashrate of the Bitcoin network fell to 91EH/s, a six-month low.

Affected by the continuous decline in computing power in the short term, the average monthly computing power from June to now has fallen to 140.20 EH/s, the lowest in the year, and a month-on-month decrease of about 13.08% compared with the average monthly computing power of the previous month. However, from the perspective of the historical average monthly computing power level, this month's computing power is still higher than any month in the past three years, which means it is still at a historically high computing power level.

From the perspective of the hashrate distribution of major mining pools, as of June 17, AntPool and ViaBTC were the two mining pools with the highest hashrate shares, reaching 15.66% and 14.76% respectively. In addition, the hashrate shares of Poolin, BTC.com and Binance Pool also exceeded 10%.

The combined computing power of these five mining pools has reached 62.77% of the entire network, and the main computing power of many mining pools comes from China. Affected by the recent tightening of mining regulatory policies by the Chinese government, the computing power shares of different mining pools have shown obvious differentiation.

Even mining pools with Chinese backgrounds have seen mixed gains and losses. Some mining pools have seen a significant decline in computing power share recently. These mining pools may be more dependent on the computing power supply of a certain region, and the region happens to have tightened local regulatory policies. For example, the average computing power share of 1THash, Huobi.pool, and F2Pool in the past week has dropped by more than 40% compared with the average computing power share of last month. However, some mining pools have still seen an increase in computing power share recently, such as BTC.com and Binance Pool, which have increased by more than 10%, and ViaBTC has increased by more than 56%.

During the same period, the computing power shares of mining pools that mainly rely on overseas computing power, such as Foundry USA and SlushPool, increased by 19.41% and 27.55% respectively, which is a significant increase.

However, judging from the mid-term changes in the computing power of various mining pools, there are only four mining pools whose average computing power share in May this year maintained positive growth compared with the average computing power share in January. They are AntPool, ViaBTC, Poolin and Foundry USA. The other six mining pools within the statistical scope have declined to varying degrees. It can be seen that the head effect of mining pools still exists and is becoming more and more significant.

Whether this policy adjustment will have an impact on the domestic mining pool landscape requires further observation, but judging from the changes in computing power share in the past week, the leading mining pools may have stronger risk resistance due to the large number of overseas mining resources they cooperate with. Among the top three mining pools, the computing power shares of AntPool and Poolin both fell slightly, while ViaBTC rose sharply.

The block time is extended to 11.55 minutes.

The average monthly block output hit a new low since 2019

As the computing power of the entire network dropped, the difficulty of mining also decreased. According to statistics, as of June 17, the difficulty of the Bitcoin network has been adjusted 12 times this year, including 8 increases and 4 decreases. Among the 4 decreases, 3 occurred in the past month, namely, a decrease of 12.61% on May 12, a decrease of 15.97% on May 30, and a decrease of 5.30% on June 14. The recent period is also the period with the largest frequency and magnitude of short-term decreases in mining difficulty in the past three years.

Also affected by the decline in computing power, the block generation speed of the Bitcoin network has also increased recently. On June 15, the block generation interval (MA7) of the Bitcoin network was about 11.55 minutes, an increase of 5.29% from the beginning of the month, the longest block generation interval of the year. In fact, since May, the block generation speed of the Bitcoin network has slowed down significantly, with the increase of the block generation interval in May being about 3.88%. Prior to this, in the first four months of this year, the average monthly increase of the block generation interval of the Bitcoin network was only 1.96%.

On the other hand, the number of blocks produced by the Bitcoin network is also declining. As of June 15, the average daily block production this month was only 135.20 blocks, a month-on-month decrease of about 5.24%. In terms of historical block production, the average daily block production this month hit the lowest value since November 2018.

In addition, the size of each block produced by the Bitcoin network has also dropped significantly recently. According to statistics, as of June 15, the average block size this month is about 1224.8 KB, and the lowest daily average block size is only 926.5 KB. Before this month, the average block size remained basically stable, fluctuating around 1290 KB.

The on-chain activity has decreased significantly.

Average monthly trading volume hits 34-month low

It can be seen that the short-term decline in computing power has already affected some other indicators of the Bitcoin network. However, the impact of the decline in computing power on the actual operation of the network may be smaller than expected, because the demand for use is also significantly reduced.

According to statistics, as of June 15, the average daily number of Bitcoin on-chain transactions this month was about 227,500, a month-on-month decrease of about 9.43%, and the overall decline this year reached 29.98%. From the historical data, the average daily on-chain transaction volume this month hit the lowest value in 34 months since August 2018. The activity of the Bitcoin network has declined significantly recently.

From the overall trend, as of June 15, the computing power of the Bitcoin network this year is still showing an overall growth trend. Even if it is affected by policies, the computing power will continue to decline in the short term, so the overall development trend of computing power this year is at most a slight decline. However, the downward trend of the number of Bitcoin on-chain transactions during the same period is much more obvious. This relative change may mean that the current computing power can still meet the needs of on-chain transactions, or it may mean that some non-essential or non-instant transaction needs are integrated, so that the on-chain transaction needs adapt to the changes in computing power. But in either case, the current operation of the Bitcoin network is generally normal.

Moreover, even if the computing power has declined recently, the shutdown and liquidation have also greatly affected the income of miners. But overall, the increase in Bitcoin computing power this year is smaller than the increase in the price of the currency during the same period. With stable electricity prices, this means that as of June 15, Bitcoin miners have been earning excess profits this year.

These excess returns may provide a material basis for miners to overcome the current difficulties. However, if the policy continues to be high-pressure, miners are blocked from "going overseas" or cannot survive in China, it is possible that the market will face greater selling pressure from miners in the medium and long term.