The mining difficulty increased by 97.67% throughout the year. Which mining pool kept pace with the increase?

Text, data and visualization | Carol Editing | Bi Tongtong

Data Partner | Produced by BTC.com | PANews

The mining circle is a mysterious and closed circle for many people. Previously, PANews and Tencent News jointly produced "Mining Circle Besieged City", which tells the story of the "jianghu" of the mining circle performed by miners, mine owners, mining machine dealers, and "smugglers" behind the mines where the roar resounds day and night under the "roller coaster" market of Bitcoin. If these real stories are just microcosms of the mining circle, then the data can restore the true face of the mining circle in 2019. Did the mining circle make money in 2019? How will this mysterious niche industry develop in the future? This article is "A Review of Bitcoin Mining Data in 2019 (Part 1)"

PAData Insights:

• In 2019, the total computing power of the Bitcoin network increased by 143.59%, with the highest increase reaching 202.71%. Among them, June had the highest increase in computing power in a single month throughout the year.

• In 2019, the Bitcoin network increased its difficulty 20 times and decreased it 7 times, with a cumulative increase of 97.67%.

• In 2019, except for the second quarter, miners’ profits were not optimistic.

• In terms of computing power share throughout the year, BTC.com, F2Pool and Poolin ranked the top three. At the end of the year, Poolin and F2Pool overtook BTC.com and ranked the top two.

• The monthly block numbers of F2Pool and Huobi.pool and the monthly average coin price show a high correlation, that is, when the coin price is high, the number of blocks produced by both is also high, and they keep pace throughout the year.

1. The annual computing power increased by 143.59% and the difficulty increased by 97.67%

In 2019, the computing power of the Bitcoin network showed a clear upward trend, with an increase of 143.59% throughout the year and a maximum increase of 202.71%. As of December 31, the computing power of the entire network reached 98.77 EH/s. From the monthly computing power growth trend, May and June, when the price of the currency was in a period of rapid increase, and September, when the price of the currency was in a period of oscillation and adjustment, were the times when the computing power grew faster throughout the year. Among them, the computing power of the entire network increased by 22.29% in June, which was the month with the highest computing power increase in a single month throughout the year.

Since market regulation has a certain lag, the rapid increase in computing power in June may be the result of miners gradually entering the market after seeing a clear upward signal at the end of April. The cause of this lag is related to the production capacity adjustment of mining machine manufacturers when the market suddenly turns from bear to bull, and the time it takes for miners to purchase, deploy and operate mining machines. Similarly, when the price of the currency begins to fluctuate or fall, the computing power will not drop immediately, and there is also a certain lag period. In September, the price of the currency entered a fluctuating downward channel, but the computing power still showed a clear upward trend, but in October and November thereafter, the computing power no longer continued to rise. This is mainly because there is a certain time difference between miners watching the trend of currency prices and adjusting their mining behavior.

PAData analyzed the growth trend of computing power and coin price based on the excess profit theory and believed that in the past ten years, the Bitcoin mining industry has shown a cyclical pattern of three years, consisting of a main profit period of about one year and an adjustment period of about two years. The mining industry in 2019 is still in the adjustment period of the three-year cycle. The main profit period refers to the period when mining can obtain excess profits because the growth rate of computing power is lower than the growth rate of coin price over a period of time. On the contrary, the decline in mining profits belongs to the adjustment period. The latest round of adjustment period began in January 2018. In 2019, the mining industry was still in a deep adjustment period, with an annual coin price increase of 88.21% and a computing power increase of 143.59%.

However, in the second quarter, the price of coins continued to rise, and the increase exceeded the increase in computing power during the same period (the slope of the orange function in the figure below> the slope of the blue function), and the mining industry ushered in a short period of profitability. However, in the third and fourth quarters thereafter, the price of coins fell, but the computing power still grew moderately, and the pressure on mining profits increased.

If the time dimension is folded into each quarter, the trend of changes in computing power and coin prices is more obvious. In 2019, except for the second quarter, miners' profits were not optimistic.

The Bitcoin network will adjust the difficulty of mining according to the computing power, which is a constraint mechanism to maintain the relative stability of the system. According to statistics from BTC.com, in 2019, the Bitcoin network increased the difficulty 20 times and decreased it 7 times, with a cumulative increase of 97.67%.

Among them, the difficulty of the entire network increased by 14.23% on July 9, which was the largest single increase in difficulty throughout the year. In addition, there were single increases of more than 10% in difficulty in January, May, August and September. Compared with the increase, the difficulty reduction seems much milder. Only on November 8th was the difficulty reduced by 7.10%, and the remaining 6 reductions were all around 1%. In the mining cycle, the increase in coin price - the increase in computing power - the increase in difficulty has formed a causal chain reaction with a lag.

The price of the currency is "unpredictable", the difficulty is constantly increasing, and the business in the mining circle is increasingly testing brainpower. Wen Ge (pseudonym), a mine owner who has been operating a mine for several years, said in an interview with PANews that "the threshold for Bitcoin mining is getting higher and higher. In the past, you could mine without thinking, but now you have to hedge to stabilize the rate of return. Otherwise, if the market collapses one day, and the machine cannot be shut down because of the signed agreement, the mine will have to bear a huge loss."

2.BTC.com gives way to the largest mining pool

Large mining pools gather more computing power in the market and have a natural advantage in producing blocks. From the perspective of the computing power market share throughout the year, BTC.com accounts for 17.16% of the computing power of the entire Bitcoin network, and F2Pool and Poolin rank second and third, accounting for 12.21% and 11.98% of the computing power of the entire network respectively. The three major mining pools constitute the first camp of computing power.

Secondly, the average annual computing power of AntPool, SlushPool, ViaBTC and BTC.TOP all account for more than 5%. These four major mining pools constitute the second camp in the Bitcoin computing power market.

However, unlike the stable three-way competition among Binance, Huobi and OKEx in the exchange sector, the competition in mining pools is more intense.

In 2019, the market share of computing power changed frequently. According to statistics, before August 2019, BTC.com always dominated the computing power market, but after August, its computing power market share began to decline, and by the end of the year it had fallen to third place (the ranking of mining pool computing power here does not include Other), and its computing power in December fell to 13.49% of the total network computing power. Another large mining pool that has also gone downhill is AntPool, which ranked second with 11.49% of the total network computing power at the beginning of the year, but by the end of the year, its computing power market share had fallen to fourth place, with a computing power share of about 10.54% in December, and a year-on-year computing power share of 8.27%.

On the other hand, Poolin and F2Pool both achieved a "reversal" in 2019. Poolin's computing power accounted for only 8.91% of the entire network at the beginning of the year, ranking sixth among major mining pools. Even before May, Poolin's computing power market share had declined, but after May, its computing power market share increased rapidly. As of December, Poolin has become the largest mining pool in the entire network, with a computing power market share of 17.55%, and a year-on-year increase of about 96.97%.

The computing power change trajectory of F2Pool is similar to that of Poolin. At the beginning of the year, its computing power accounted for about 9.61% of the entire network, ranking fourth among major mining pools. At the end of the year, its computing power accounted for 16.16% of the entire network, making it the second largest mining pool in the entire network. The annual computing power increase was about 68.16%.

It is also worth noting that 1THash&58COIN and BytePool have strong development momentum at the end of the year. 1THash&58COIN's computing power market share in December reached 5.19%, surpassing Huobi.pool to rank sixth. BytePool also accounted for 4.32% of the computing power share of the entire network in December. Although it is not ranked high among the large mining pools, its share is not far behind Huobi.pool and 1THash&58COIN.

Combined with the mining cycle under the theory of excess profits, the mining income pressure in the third and fourth quarters of 2019 was relatively high, so although 1THash&58COIN and BytePool occupied a good market share at the end of the year, they did not catch up with the good time to make money. This shows the second aspect of the fierce competition in the mining industry, that is, not only the computing power share of major mining pools changes frequently, but also although more players enter the market to share a piece of the pie, in fact only a small number of mining pools have eaten excess profits.

3. F2Pool and Huobi.pool follow the rise and fall of coin prices

Which mining pools hit the right rhythm and earned excess profits in 2019?

PAData counted the number of blocks produced by major mining pools every month throughout the year and analyzed its correlation with the average monthly coin price.

According to statistics, BTC.com, which has the largest average computing power throughout the year, has produced more than 500 blocks per month throughout the year, and more than 800 blocks per month from May to August. However, the Pearson correlation coefficient between the number of blocks produced by BTC.com per month and the average monthly coin price is only 0.47, showing a weak correlation. This means that although BTC.com has reaped excess profits in the second quarter, it has also maintained stable block production in the first, third and fourth quarters when mining revenue pressure is relatively high, which may have lowered its annual revenue level.

F2Pool, which completed a "reversal" in computing power share this year, has kept pace with the times. Its number of blocks produced each month since May has been more than 500, with the highest number of blocks produced in October, reaching 745. The number of blocks produced by F2Pool each month and the average monthly coin price show a high correlation, with the Pearson coefficient reaching 0.72. This basically means that when the coin price is high, F2Pool also produces more blocks. However, Huobi.pool has the most accurate rhythm, with the correlation between its number of blocks produced each month and the average monthly coin price reaching 0.74.

However, Poolin, which also achieved a "reversal" in computing power share, did not get the rhythm right. Its block production only stabilized at more than 500 after July. However, the coin price no longer continued to rise at that time, but entered a period of volatile adjustment. Therefore, the correlation coefficient between Poolin's monthly block production and the average monthly coin price is only 0.39, which is basically unrelated.

The mining pools with the least rhythm in 2019 may be Bitcoin.com and easy2mine. The correlation coefficients between the monthly block output and the average monthly coin price of the two mining pools are -0.63 and -0.56 respectively. This means that when the coin price is low, the two mining pools produce more blocks, and when the coin price is high, the number of blocks is lower.

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