Bitcoin mining has become much easier and more profitable. It has been known for months that more than half of the world’s cryptocurrency miners are out of business as China cracks down on mining.
The Bitcoin algorithm has now been modified accordingly to ensure that the productivity of miners does not continue to decline.
This amendment – which took effect early Saturday morning – also means that in this way more money goes to miners who stay online.
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Bitcoin mining just got easier
Bitcoin miners run a computer program to try to solve a puzzle before anyone else. Solving this puzzle is what completes the block, a process that creates a new bitcoin and updates the digital ledger to keep track of all bitcoin transactions.
China has long been a hub for bitcoin miners, with previous estimates suggesting that between 65 and 75 percent of the world’s bitcoin mining occurred there. But the government-led campaign has led to the exclusion of cryptocurrency miners in the country.
For the first time in the history of the Bitcoin network, there was a complete cessation of mining in a target geographic area affecting more than 50 percent of the network.
More than 50 percent of hashrate — the collective computing power of miners around the world — has taken off the network since its market peak in May.
Mining fewer people means that fewer blocks are solved each day. It usually takes about 10 minutes to complete the block. But the Bitcoin network has slowed down to between 14 and 19 minutes.
Which is why Bitcoin recalibrates every 2016 blocks, or roughly every two weeks, redefining how hard it is for miners to mine.
Bitcoin code automatically reduced mining difficulty by 28 percent, a historically unprecedented drop for the network. The block times thus returned to the optimal time range of 10 minutes.
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The Bitcoin algorithm is programmed to deal with the increase or decrease of miners. Fewer competitors and difficulty means that any miner with a plug-in machine sees a huge increase in profitability and more predictable revenue.
They all share the same economies and mine through the same network. As a result, public and private miners see higher revenues.
Assuming fixed energy costs, revenue is estimated at $29 per day for those using the latest generation of devices Bitmain, for $22 a day before the change.
An increase in revenue and profits is expected for the foreseeable future. Although lower difficulty benefits all miners, it is those who use new generation equipment that benefit the most.
Most of the equipment decommissioned in China was of the old generation, inefficient and operating at much lower profit margins.
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It is difficult to predict how long the retail deficit will last. But it is possible for Beijing to reverse its policy, and this could be a short-term interruption.
If not, most cryptocurrency experts agree that it could take 6 to 15 months for all the idle mining hardware. And the overflow takes a long time to find a suitable place.
It is believed that Bitcoin miners may see an increase in revenue for at least the rest of 2021. Every day worldwide, Chinese miners are looking for places to reboot their machines. There is very limited space at the moment.
Part of the problem is that even before China halted mining, there was a lack of infrastructure to house the new generation mining hardware from Beijing-manufactured Bitmain.
With the market flooded with used mining rigs, it is difficult to say how quickly countries can absorb the influx of equipment.
Of all the potential destinations for this equipment, the United States appears to be well placed to absorb this missing hash rate.
Major US mining operators sign deals to take control of Bitmain mining hardware.
Bitcoin mining is booming in the US, investment capital is flowing, so they are ready to take advantage of the exodus of miners.