On-chain data suggests that the difficulty of Bitcoin mining dropped by about 5% in the next network maintenance, a change that miners can appreciate.
Bitcoin Network Blockage Time Has Been Slower Than Usual Lately
“Mining difficulty” refers to how difficult miners can get to block mining on the BTC network. The purpose of the difficulty is to ensure that the total time between each block being added to the blockchain, known as block time, remains constant at around 10 minutes.
Whenever the speed of miners deviates from this value, the network adjusts its Difficulty to get the block time back to normal. These changes happen every two weeks, and the latest ones will go live sometime tomorrow.
As data from CoinWarz shows, miners have not been able to mine at the rate of a block every 10 minutes during the past few weeks.
Looks like the Difficulty is set to drop tomorrow | Source: CoinWarz
With an average block time of 10.52 minutes, the Bitcoin blockchain has been running slower than intended, so the network will reduce its difficulty by 4.91% tomorrow. With the lower difficulty, miners should find it easier to find blocks and restore the chain faster.
As for why miners are slowing down recently, the answer lies in the trend of Mining Hashrate, a measure of the amount of total computing power that miners have connected to the BTC blockchain.
Below is a chart from Blockchain.com, showing last year’s 7-day average data for this metric.
The trend in the BTC Hashrate over the last twelve months | Source: Blockchain.com
As can be seen in the graph, the 7-day average of Bitcoin Mining Hashrate had set a new record at the beginning of the month, but since then, the value of the index has dropped significantly.
With less computing power available to them, miners have slowed down in their work recently, forcing the network to slow down. If they had instead increased their power this time, Difficulty would be headed for another increase.
The reduced difficulty will be refreshing for miners, as the block time is directly linked to their income. Miners make their income from block reward, a combination of block grants and transaction fees, which they receive as compensation for solving blocks.
The faster miners get through the blocks, the more money they can make. Since the network tries to limit its block time to 10 minutes, there is a limit to how much miners can earn.
Even if miners double their computing power overnight, they can at least double the speed in a few weeks, before the Bitcoin blockchain brings them back to normal by significantly increasing the Difficulty.
This is the main reason why Difficulty exists, so that miners can’t keep increasing their power endlessly in order to kneel on blocks quickly. Without this feature, cryptocurrency can become a victim of inflation since the block subsidy, the main component of the block reward, is how new coins are ‘made.’
BTC price
At the time of writing, Bitcoin is floating around $63,400, up 4% over the past seven days.
Looks like the price of the coin has been showing stale action recently | Source: BTCUSDT on TradingView
Featured image from Dall-E, Blockchain.com, CoinWarz.com, chart from TradingView.com