Following the recent "great hash-power migration" fuelled by China’s clampdown on crypto mining, the mining difficulty of the Bitcoin network has plunged by a whopping 27.9%. This is the largest drop in mining difficulty since Bitcoin launched in 2009.
For the uninitiated, mining difficulty is a measure of how hard it is to create a new block. The higher the difficulty of a network, the more computational power is needed to create a new block.
In the case of Bitcoin, it takes about ten minutes for a new block to be added to the blockchain depending on the number of active miners on the network and the speed of their computers.
That being said, the Bitcoin network is designed to self-adjust its mining difficulty after every 2,016 blocks, which is roughly every two weeks. The adjustment ensures that blocks are produced within ten minutes or so, despite the network’s fluctuating hash rate.
Since the network’s last adjustment on June 13, the seven-day moving hash rate of Bitcoin has dropped from 136.47 EH/s to 85 EH/s, representing a 35% down.
As reported by BTC PEERS, the crash in hash rate has been caused by China’s move to shut down several Bitcoin mining facilities across a number of provinces.
What this means for Bitcoin miners
The implication of the drop in mining difficulty is that mining Bitcoin has become significantly easier and more profitable. More cash will be going to miners who are still online. According to Bitcoin mining engineer Brandon Asrvanaghi, “this will be a revenue party for miners, they suddenly own a meaningfully larger piece of the pie, meaning they earn more bitcoin every day.”
China has been at the epicenter of Bitcoin mining. Before its crackdown, it was estimated that the Asian country controlled between 65% and 75% of the world’s total Bitcoin hash rate. However, amid the recent anti-crypto move, more than 50% of Bitcoin’s hash rate has dropped off the network after it peaked in May. Darin Feinstein, founder of Blockcap and Core Scientific said:
For the first time in the bitcoin network’s history, we have a complete shutdown of mining in a targeted geographic region that affected more than 50% of the network.
Fewer miners also mean that fewer blocks are solved daily. And while it takes about 10 minutes to mine a new block as earlier mentioned, Feinstein told CNBC that the Bitcoin network has slowed down to between 14 and 19 minutes.
Former Chief Mining Officer at Greenridge Generation Kevin Zhang estimates that miners using the latest generation of Bitmain will generate about $29 per day, versus $22 daily before the drop in difficulty.