After the China ban on mining activities which caused the Bitcoin mining difficulty to decline, new data from BTC.com shows an upward trend in Bitcoin’s mining difficulty, suggesting that miners have started operations in new locations.
What you should know
The Bitcoin mining difficulty is a measure of how difficult it is to mine a Bitcoin block, or in more technical terms, to find a hash below a given target. A high difficulty means that it will take more computing power to mine the same number of blocks, making the network more secure against attacks and vice versa.
The Bitcoin mining difficult as of May 2021, took a nosedive along with the price of Bitcoin from 25 terahash (t) to 13.7t towards the end of July 2021 representing a 45.2% drop. However, the mining difficulty has appreciated, currently standing at 15.6t, a 13.87% rise from its July low which indicates that miners from China are slowly settling down in crypto-friendly geographies.
Since the crackdown, the sudden decline in the number of Chinese miners had lessened the competition in confirming blocks. This allowed the existing miners on the network to make more profits because mining Bitcoin became easier. Data from Statista shows that China’s contribution towards Bitcoin mining has reduced to nearly 46% while the United States picked up the slack, hosting almost 17% of the global mining hashrate.
What they are saying
Quantum Economics crypto analyst, Jason Deane, in an interview with CNBC mentioned the network’s latest difficulty adjustment mechanism has made it 7.3% less profitable to mine Bitcoin.
Mike Colyer, CEO of a New York-based digital currency group stated, “There is an enormous amount of machines coming out of China that need to find new homes.” He mentioned that he is confident in the new generation of mining rigs will be more efficient and would “double the hash power for the same amount of electricity.”
China’s move against Bitcoin mining struck a blow to the mining community and Bitcoin’s security as mining also protects the Bitcoin network from potential hackers. The crackdown was as a result of energy concerns as mining requires a large amount of energy to begin with. After the crackdown, countries like Canada, Kazakhstan, Russia and the United States came forward as the best options for migrating Bitcoin miners.
Bitcoin is currently trading $46,500, up 3.31% as of the time of writing this report.