The Bitcoin network has re-adjusted its mining difficulty, slashing it by 16 percent, the second-largest negative change in the platform’s history, GlassNode data on Nov 3 shows.
The Bitcoin mining difficulty now stands at 16.7 trillion down from 19.99 trillion registered on Oct 17, 2020.
What is Mining Difficulty?
In the open Bitcoin network, mining difficulty indicates how difficult it is to solve a cryptographic puzzle. It is a unit that is influenced by several variables like hash rate and price.
Hash rate is the measure of the network’s computing power. The more miners participate, the more Bitcoin can process and fend off attackers.
Being a miner in the Bitcoin network is free. Anyone, anywhere in the world can join and be part of the force. However, committing computing resources to Bitcoin is expensive.
For this reason, the Bitcoin price leads. If prices edge higher, the hash rate increases. Subsequently, the network’s algorithm automatically increases the mining difficulty. Conversely, when prices fall, miners tend to switch off their gear, forcing the Bitcoin algorithm to dump down mining difficulty.
The Automatic Adjustment and Sichuan Migration
These adjustments of the network’s mining difficulty, done every 2016 blocks or approximately two weeks, are by design and meant to keep block generation at roughly 10 minutes.
Several reasons may explain the drop in difficulty. One of them is Chinese miners migrating their gear from Sichuan province.
Coinciding with the end of the rainy season. Sichuan is a Bitcoin mining hub. During the rainy season, miners move and launch their operation from this zone, taking advantage of the cheap hydro-electricity–rates can be as low as $0.03/KWh.
According to BitInfoCharts, the Bitcoin hash rate has fallen from 157 EH/s registered on Oct 17 to 114 EH/s of Nov 2.
An Opportunity for Now?
Despite the disruption, analysts expect the hash rate to recover and the next adjustment to be positive as miners plug back to the system after exiting Sichuan.
At the same time, between now and the next adjustment, around the third week of November, efficient miners will highly probably remain in the green.
In late October, as BTCManager reported, following an upward adjustment of mining difficulty, the hash rate fell by 10 percent.