Multiple on-chain data platforms predict that Bitcoin will experience a drop of about 21% in the upcoming adjustment of mining difficulty. The difficulty and hash rate decline shows the size of China’s mining plant shutdown orders this month.
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Determining how difficult it is for miners to solve the cryptographic puzzle required to mine new blocks, Bitcoin mining difficulty is poised to see its biggest drop ever in an upcoming adjustment.
Multiple on-chain data platforms predict that Bitcoin mining difficulty will see a drop of about 21% in its upcoming adjustment, which will take place at block height of 689,472, or about five days from release. This will be the largest ever difficulty drop in Bitcoin history, and also the first time the network has seen three back-to-back difficulty drops since December 2018. The difficulty metric dropped 16% on May 30, and fell 5% on June 14.
Bitcoin’s mining difficulty is designed to adjust itself every 2016 blocks based on the overall hash rate race on the network. The average hash rate securing the world’s largest blockchain by market cap has now dropped from 142 exahash per second (EH/s) on June 14 to just under 100 EH/s.
The amount of hash power distributed on the network determines how long it takes to generate blocks—a process that should take 10 minutes by the rules of the network. If block generation becomes faster than 10 minutes, the network difficulty will increase. On the other hand, if a large number of miners take themselves offline, block generation time will increase, which will reduce network difficulty.
The average block production interval on the Bitcoin network since its previous adjustment on June 14 is about 12.9 minutes. That means it’s about 30% slower than the intended 10-minute interval per block.
The overall difficulty and hash rate decline since the beginning of this month illustrates the magnitude of mining plant shutdown orders issued by the Chinese governments in Xinjiang and Sichuan, which until recently were the world’s two largest mining centers.
Bitcoin miners who are still tied and unaffected by China’s regulatory situation will see a larger share of mining rewards – proportional to the difficulty drop – following the next adjustment.
Millions of ASIC Miners Unplugged
The network’s hashrate has dropped by about 70 EH/s since the provincial governments in Xinjiang and Sichuan ordered to cut electricity supply for Bitcoin mining facilities on June 9 and June 18, respectively. This corresponds to about 50% of last month’s total.
This also means that millions of Bitcoin ASIC miners have been removed from the network and are now either trying to change hands or waiting to move elsewhere. There is currently a spike in the secondhand miner market which has led Bitmain to even suspend its global sales for spot orders.
The hash rate on the Ethereum network has also taken a hit, dropping by 20% since the beginning of this month.
However, Igor Runets, founder and CEO of Russia-based Bitcoin mining hosting provider BitRiver, “After the sudden global interest in green Bitcoin mining, the surge in demand for our renewable-powered colocation services has worsened after the Chinese government’s announcement of restrictions on mining” said.
Runets said that shortly after the Sichuan government’s order, BitRiver signed up Chinese mining customers for 150 megawatts of hosting capacity, which will be fully functional within four months. However, he thinks that the lack of current hosting availability supply globally will make it difficult to meet new demand from Chinese miners at any time.
Indeed, Bitcoin miners operating in Xinjiang alone at a combined capacity of around 2,000 megawatts until June 9 were forced to shut down.
Runets, “Given the shortage of hosting space for bitcoin miners and the time it takes to build new mining facilities or install new machines, I don’t think the hash rate will recover anytime soon.” said: