The shutdown of the majority of mining farms based in China is having a big impact on bitcoin. To face this new situation, the network has significantly readjusted the difficulty of the mathematical puzzles to be solved to mine blocks on the bitcoin blockchain.
The difficulty of mining bitcoin has dropped sharply: -28%. This is the biggest drop ever seen on the bitcoin blockchain, CNBC notes. Why is it now easier to mine the most famous cryptocurrency? It’s linked to how the bitcoin blockchain works. This is in fact based on proof of work and requires minors to solve complex mathematical calculations to validate a block and earn the associated reward.
Bitcoin designer Satoshi Nakamoto predicted the rate of block validation to remain stable (every ten minutes or so). When mining capacity increases (as new people start mining bitcoin or existing entities acquire additional machines), the difficulty of mining bitcoin is increased. Conversely, when the mining capacity decreases, the difficulty of the calculations is reduced.
China has shut down most bitcoin mines
The decrease in the difficulty of mining bitcoin is therefore not surprising: the mining capacity has indeed fallen sharply in recent times. The hashrate (the amount of calculations that all miners are able to perform per second) has indeed decreased by 54%. It has to do with the drastic measures taken by China against bitcoin miners. The country has so far hosted most of the world’s mining (between 65 and 75%). But local authorities fear the speculation that cryptocurrencies can lead to, and the hefty energy bill of bitcoin. Beijing has therefore passed very restrictive regulations in this area, and even ordered to cut off the power to the majority of mining farms. Almost 90% of the country’s mining capacity has thus been stopped.
If these restrictions don’t do the business of minors who were based in China, others are happy. The decrease in the difficulty of bitcoin mining will ” increase the incomes of miners. They will suddenly have access to a bigger slice of the pie and can earn more bitcoin “, Enthuses Brandon Arvanaghi, engineer specializing in cryptocurrencies, interviewed by CNBC.
Chinese miners seek a new base
It remains to be seen how quickly the hashrate of the bitcoin blockchain is back to its previous level. Some entities have already moved their farms based in China to neighboring Kazakhstan. And a large part of the players who have had to cease their activities are actively looking for a new base. The United States will certainly be a popular destination: several states (Texas, for example) have passed cryptocurrency-friendly regulations, and have renewable energy policies that may be of interest to miners – who need a lot of money. electricity, at low cost and with as little carbon impact as possible. But other countries, such as El Salvador, which recently announced that it would make bitcoin legal tender, could also try to position themselves.
Relocating mining activities will of course take a little time. However, the network will undoubtedly be able to return to its previous level within a few months. Compared to other sites (industrial for example), it is indeed not too complex to move a bitcoin farm. Machines can be moved relatively easily and, above all, minors do not need to be located near the people with whom they are interacting.