In the history of Bitcoin, for the first time, mining difficulty has dropped 28%. According to the latest data disclosed by Glassnode, a rare incident has happened that mining difficulty has decreased 28%.
What mining difficulty is?
It is a metric used to find out how much difficulty miners are facing to mine new blocks. Miners need more computational power to mine new blocks when the difficulty of mining increases but this time, the difficulty is decreasing, which makes it easier to mine. The decrease in mining difficulty is considered a drawback because a higher difficulty level makes the mining network more secure and sturdy.
The behavior of mining difficulty resembles price fluctuation. The element responsible for fluctuation in mining difficulty is the hash rate. Incoming and outgoing of hash rate makes the difficulty level fluctuate.
After completion of 2,016 blocks, mining difficulty readjusts spontaneously. On average, mining of 2,016 blocks requires two weeks to complete (10 minutes for one block). This procedure is termed Bitcoin mining difficulty adjustment.
Role of Chinese crackdown
China was considered the hub of Bitcoin mining as almost 65% of miners were settled in China. In the past, this fact was subject to many questions regarding decentralization. Critics said that Bitcoin is no more a DeFi as the majority of its miners are located in one country.
For the last two months, China has demonstrated an aggressive policy towards miners. The authorities have decided to halt the mining completely in their country. This has produced a situation of chaos for miners as well as Bitcoin itself. As China has decided to lose its hash rate, miners are either shutting down their equipment or migrating to other regions of the world. So far, the majority of miners have opted for Kazakhstan and United States as their destinations.
Apparently, the Chinese ban is negative progress, but in the long run, it will be effective in increasing the decentralization and security of Bitcoin. It will lead to the distribution of miners from China all over the world.
Effects on miners
A decrease in mining has lead to a decrease in the hash rate of Bitcoin. Right now, the hash rate of Bitcoin is 87.6M TH/s, according to Blockchain.com. So far, it has already decreased 50% in the span of only two months. 180M TH/s is the highest recorded hash rate. A decrease in hash rate makes it obvious that there is a lack of competition in mining, but with the emergence of new miners in the market, the hash rate will rise again.