After Bitcoin total hash rate hitting a new all-time-high on December 3rd, the protocol has automatically adjusted the mining difficulty as shown by the latest data from analytics service Glassnode.
The hash rate of the Bitcoin network hit an all-time-low on the 3rd of July last year, clocking in at 84.8 million terahashes per second, down from just above 180 million terahashes per second on the 14th of May – almost a 50 percent drop in less than two months.
Hash power back at top levels
The sudden drop in hash rate was due to the Chinese government crackdown on Bitcoin mining during the spring of 2021, and the consequent shutdown and migration of mining operations in and out of mainland China.
Since then the network’s hash power has recovered, due both to the migrants out of China finding new pastures in mostly the U.S. and Kazakhstan, and new mining equipment spun up in the network. The hash power is currently clocking in at almost 199 million terahashes per second at the moment of writing.
By the Bitcoin protocol design, the so-called mining difficulty adjusts to the fluctuations in hash rate every 2016 blocks, or approximately every two weeks. As a consequence of the hash rate at new heights, the mining difficulty increased by 9.32 percent and is now at 26.64 trillion. The upwards adjustment of the mining difficulty will cause mining operations to be less profitable than before. On the other hand, miners outside of China have seen haydays most of the year thanks to less competition from Chinese miners.
Mining difficulty increases to come
The balance between hash rate and mining difficulty is automatically set by the Bitcoin protocol such that the network should produce a new block approximately every ten minutes. Miners compete to find a random number, a so-called nonce, by randomly trying different numbers. That random number is one of the inputs to a hashing algorithm that produces a hash. The more leading zeros there are in the hash, the easier it is to find the ransom number.
As the new mining rigs are added to the network by the day, the hash power of the Bitcoin network is on the rise. This will, in turn, adjust the mining difficulty further upwards. With all likelihood, if nothing unexpected happens in the mining industry, the market can expect an increase in about two weeks.
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