ViaBTC｜Should Miners Panic amid the Severest Decline in the Bitcoin Mining Difficulty?
July 3 witnessed another adjustment in the mining difficulty of the Bitcoin network at block 689,472: the difficulty of the entire network was reduced by a staggering 27.94% to 14.36T, the biggest drop ever.
The slump is closely related to the slowdown in block generation. Bitcoin’s mean block time slowed significantly, with some blocks taking nearly 25 minutes on June 27. That was 2.5 times the ordinary block time of around 10 minutes in normal conditions, the slowest ever since 2010.
Evidently, the drop in the hashrates of the entire network should be blamed for the slowdown in the block time. Bitcoin’s hashrates kept rising since the beginning of this year and peaked at 179.25EH/s on April 15. The two-week average hashrates reached 179.25EH/s in May. Yet the rise proved short-lived. In response to the carbon neutrality policy of the Chinese central government, Inner Mongolia, Qinghai, Xinjiang, Yunnan, and Sichuan successively issued orders to stop Bitcoin mining and shut down Bitcoin miners. In the face of the ongoing crackdown, many miners could do nothing but turn off and relocate their mining machines overnight.
On June 20, two days after Sichuan Province’s order to shut down mines, the hashrates of the entire network plunged below 100EH/s, followed by the declining hashrates of several major mining pools. According to the data from the BTC.com explorer, F2Pool saw its hashrates shrinking by 14.19%, BTC.com by 15.66%, Binance Pool by 24.62%, Huobi Pool by 26.71%, and AntPool by up to 29% within 24 hours. By contrast, ViaBTC, another leading mining pool, only lost 2.37% of its hashrates within 24 hours. By June 27, the hashrates continued to fall to 61EH/s, prolonging the block time to 25 minutes that day.
The miners who were forced to shut down their mining machines have to consider selling their machines to overseas mines or relocating the machines overseas. But it takes time before they settle down, so a large rebound in the hashrates could hardly be expected soon. What’s worse, the difficulty keeps dropping. According to BTC.com’s prediction based on the current decline in hashrates, the difficulty would drop by another 28.37% in the next adjustment.
Safe from the Chinese mining crackdown, overseas miners have benefited from the difficulty slump because they can mine as usual and reap more rewards with the hashrates unchanged. A good example in point is ViaBTC Pool. Having migrated the bulk of its hashrates overseas years ago, ViaBTC has left itself seldom under the sway of policies in China. Therefore, it manages to keep its hashrates stable and has even outrun its counterparts in terms of hashrates in the past week. Thanks to ViaBTC, its miners have gained a lot from the adjustment of hashrates.
Previously, the hashrates from China had accounted for more than 65% of Bitcoin’s hashrates. No wonder the recent mining regulation is generally believed to be a heavy hit on the Bitcoin network. Despite the slowing block time and the difficulty slump, the Bitcoin network manages to operate stably and blocks are generated on schedule since the difficulty will rise or fall with hashrates. Such a flexible adjustment in difficulty will cushion the entire network from all unpredictable risks.
The reduction in the Bitcoin mining difficulty due to the Chinese crackdown is not necessarily bad news. As it quit the industry, the Chinese market that once grabbed the lion’s share did not deal a heavy blow to Bitcoin, which serves as convincing evidence of how globalized and decentralized Bitcoin is for the time being. The two features have also injected great vitality into Bitcoin, protecting it from any policy change of a single country or region. For the majority of Chinese miners who have to “relocate” their mining machines due to the regulation, mines in North America, Kazakhstan and Russian may be good alternatives. We have every reason to believe that Bitcoin will secure persistent miners a long-lasting, stable source of income.