The Bitcoin blockchain has seen the biggest drop in mining troubles of all time when the network’s automatic stabilization mechanism kicked in after a tough crackdown on the country’s cryptocurrency industry.
At 6:25 UTC on Saturday, the mining difficulty at block 689.471 decreased by almost 28%.
The steep drop in difficulty resulted in a corresponding drop in transaction fees, which in turn could have pushed the price of the leading cryptocurrency up $ 1,000 in anticipation of a transaction surge, according to an observer. In its most recent trade, the price of BTC was $ 34,738, up 3.58% over the past 24 hours. Before the mining difficulty was reduced, the BTC was around $ 33,700.
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Charlie Morris, CIO of ByteTree Asset Management, tweeted hours after the difficulty cut that yesterday’s fees had dropped to $ 6.
The adjustment marks the third decline in mining difficulty in a row, the first time since December 2018. On May 29 and June 13, the mining difficulty fell by 16% and 5%, respectively, according to mining service provider BTC. com.
What is the difficulty in mining Bitcoin?
Bitcoin’s difficulty is measured using an internal score that started at 1 (when Satoshi started mining at the easiest level). It is programmed to incrementally increase or decrease depending on how many miners are competing on the network. It currently stands at 14,363,025,673,659 points, up from 19,932,791,027,262.
Blocks are added to the Bitcoin blockchain at regular and predictable intervals: one block every 10 minutes or so. Block time measures how long it takes to create a new block, but this pace can vary depending on the number of miners on the network and the speed of their computers. As more miners compete to “find” the next block and earn the 6,125 BTC reward, those blocks are usually resolved faster. However, as miners leave the network and fewer miners can compete, block times can slow down.
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It happened when Chinese authorities pushed for curbing the trading and mining of cryptocurrencies as the country has historically hosted so much of the hash power of the Bitcoin network. Local authorities in China’s Xinjiang Uyghur Autonomous Region, Inner Mongolia Autonomous Region, Qinghai Province and Sichuan Province followed the initiative top-down, announcing plans to shut down some or all of the bitcoin mines.
During this most recent period of difficulty, the average hashrate, a measure of the total computing power contributed to the blockchain by mining, was 87.7 exahashes per second, its lowest level since December 2019. That is a decrease from a peak of around 180 Exahashes per second in mid-May.
As a result, Bitcoin’s average block time slowed significantly, with some blocks lasting up to 23 minutes on Sunday June 27, although the network has apparently sped up slightly since then.
The Bitcoin algorithm is programmed in such a way that it adjusts the difficulty level itself every 2,016 blocks or approximately every two weeks in order to adhere to a target block time of 10 minutes.
So that’s what happened overnight when the blockchain’s automatic stabilization mechanism kicked in to motivate more miners to join the network.
Today’s difficulty level will make it easier for the remaining miners to find blocks at a speed closer to the 10 minute goal.
Although a decrease in Bitcoin’s hashrate means it is slightly less resilient to attack, the news bodes well for active miners.
“Difficulty adjustment has some interesting properties in the real world too, especially for miners,” said Will Foxley of Compass Mining. “If the level of difficulty adjusts downwards, you will earn more Bitcoin if you can stay online. When it rises, you earn less as more miners take part. “
“Miners who stay up and running are likely to become even more profitable in the coming weeks unless the price continues to correct or the hashpower migration goes back online,” Glassnode wrote in a report.
UPDATED (July 3rd, 14:44 UTC): Adds price reaction, Morris comments on fees.
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