Ryze Recap 6/18: Largest Mining Difficulty Adjustment in Years
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It’s Thursday, June 18. We’ve got one important story for you today:
The Biggest Bitcoin Mining Difficulty Adjustment Since Jan 2018
Mining difficulty on the Bitcoin blockchain jumped 14.95% on Monday, the largest increase in 29 months.
The basics:
Mining difficulty: a measure of how easy or hard it is for mining rigs to confirm transactions and secure the network. The difficulty adjusts every 2,016 blocks (roughly every 2 weeks) as a self-balancing mechanism ensuring that new blocks are created at a set pace— approximately every 10 minutes.
If there are a lot of miners and blocks are being created too fast, the difficulty will increase. If miners leave the network and blocks are created too slowly, the difficulty decreases.
Hashrate: the total amount of electricity being used to secure the Bitcoin network, higher hashrate means more mining activity and greater network security
Why this matters:
The third Bitcoin Halving occurred in mid-May. This pre-determined function of supply cut in the block reward half from 12.5 BTC per block to 6.25 BTC per block. As a result, many miners who are inefficient at the newly reduced revenue levels are were forced to shut down. This is evidenced by the decline in hashrate from May 13 - May 24:
Post-halving, we saw mining difficulty decrease twice to compensate for inefficient miners shutting down. These decreases in difficulty likely caused some miners to power back up, as shown by the increase in hashrate from May 25 onwards. Monday’s spike in difficulty is the network’s response to this.
The Halving has far-reaching implications for the mining industry, which is now dominated by large institutional players and public companies. These massive difficulty adjustments are just the tip of the iceberg. For more, read our deep dive into the Halving’s impact on miner economics and institutional mining.
That’s all for today! We’ll be back tomorrow for our last Ryze Recap of the week.