mining difficulty

Bitcoin Halving: Everything You Need to Know in 5 Minutes

Bitcoin Halving: What and Why

In May 2020, Bitcoin is expected to experience its third halving in history. Bitcoin halving refers to the halving of Bitcoin block rewards, which occurs once every 210,000 blocks created (approximately every 4 years). Block reward refers to the amount of Bitcoin received by miners after they successfully validate a new block.

The rationale of Bitcoin halving stems from the currency design of Bitcoin. In the email thread between Satoshi Nakamoto and Mike Hearn, Nakamoto suggested that the total supply of Bitcoin is capped at 21 million. This is opposite to the inflationary nature of fiat currencies in which their supply is controlled by central banks.

Figure 1: Snapshot of Bitcoin Network Source: Bitcoinblockhalf.com, Data as of May 7 2020

It is expected that all Bitcoins will be mined approximately by the year 2140 based on the following protocol design of Bitcoin:

1) The target of 10-minute block intervals;

2) Bitcoin halving mechanism; and

3) Block reward starts with 50 and reaches 0 after continuous halving events.

Figure 2: Bitcoin Inflation vs TimeSource: Bitcoinblockhalf.com

When Bitcoins in circulation reach its maximum supply, miners will no longer receive block rewards and only receive transaction fees from users as rewards. It is noteworthy that Bitcoin’s maximum supply can be changed if the changes are approved by the economic majority.

Implication of Past Bitcoin Halvings

Bitcoin block rewards started with 50 since its inception in 2009. Bitcoin experienced two halvings in 2012 and 2016 which the current block reward is 12.5 BTC. The block reward will be halved as 6.25 BTC after the third halving.

Figure 3: Bitcoin Halving ScheduleSource: Blockchain.News Data

What does Bitcoin halving mean for traders, miners and mining manufacturers?

Traders

The past Bitcoin halvings have been indicated as a positive signal to Bitcoin price. In theory, assuming Bitcoin demand stays constant, as each Bitcoin halving slows down the issuance of Bitcoin, Bitcoin in circulation will become scarcer over time and the scarcity drives up the Bitcoin price.

The Bitcoin community was unaware of the impact brought by the first Bitcoin halving in 2012, and the Bitcoin price rose almost 80x a year after (See Figure 4). The 2016 Bitcoin halving was highly anticipated by the community and the price rise was less substantial than the first halving.

Figure 4: Changes in Bitcoin Price after First Bitcoin HalvingSource: Fitzner Blockchain in Medium

Figure 5: Changes in Bitcoin Price after Second Bitcoin HalvingSource: Fitzner Blockchain in Medium

The impact of third Bitcoin halving on price is uncertain as it can be driven by the following factors (See Figure 6).

Figure 6: Possible Key Drivers on Bitcoin Price at 2020 Bitcoin HalvingSource: Blockgeeks, Blockchain.News Data

Miners

Miners will receive 50% less Bitcoin block rewards after each halving. From the previous Bitcoin halvings, Bitcoin hashrate and mining profitability resulted in an initial drop and recover after a few months (See Figures 7 and 8).

Figure 7: Bitcoin Halving on HashrateSource: Blockchain.com

Figure 8: Bitcoin Halving on Mining Profitability (USD Day for 1TH/S)Source: Bitinfocharts.com

The hash rate of Bitcoin hovers near all-time high (123.28m TH/S) and currently stands at 119.472m TH/S. Network difficulty increased 1.4% on May 5 and reached 16.105 t. For the third Bitcoin halving, Bitmex predicted that the hashrate may decline by 30-35% after the halving.

Figure 9: Total Hash Rate of Bitcoin ahead of 2020 Bitcoin HalvingSource: Blockchain.com

Mining Manufacturers

Mining manufacturers usually release new mining models ahead of Bitcoin halving, which improved efficiency enables miners to optimize their earnings. For example, Bitmain announced a new Antminer S19 and S19 pro in February. As the main competitor of Bitmain, Canaan Creative announced its Bitcoin miner Avalonminer A10 in late March.

Image via Shutterstock

Bitcoin Experiences the Second-Largest Drop in Mining Difficulty in History

Bitcoin mining difficulty has experienced a decline of 16%, which represents the largest percentage difficulty drop since Bitcoin miners started using the ASIC mining machines in late 2012, according to Glassnode data.

The Bitcoin Difficulty Estimator whose role involves providing updates every second, showed that the Bitcoin network adjusted its mining difficulty at 8:28 UTC on Nov. 3, and therefore placed the current Bitcoin mining difficulty at about 16 trillion, a decline from about 19 trillion, which represents about 16% drop. This phenomenon gives miners a reason to rejoice as their profitability is set to rise significantly.

The difficulty adjustments occur approximately every two weeks. Basically, Bitcoin mining difficulty shows how time-consuming and difficult it is to mine a new block for the Bitcoin blockchain. The difficulty decreases or increases over time, depending on the number of miners in the network.

However, there are other explanations pointing out factors affecting the mining difficulty. For example, miners have professional experience in their work and therefore know how to respond to their mining activities.

The current difficulty decline is due to the reduction of the average total computing power racing in the network in the past two weeks as several Chinese miners have unplugged their machines to migrate from hydropower plants to fossil fuel power stations.

Jason Dane, a Bitcoin analyst at Quantum Economics advisory and investment analysis company for the cryptocurrency markets, said:

“Most large-scale miners switch off their machines and some even relocate their operations to the Xinjiang region, coming back online a few weeks later. The rest of the network simply takes up the slack and the difficulty adjusts accordingly.”

Dane said that people might think that a major decline in mining difficulty shows a lack of confidence or a low price in Bitcoin. He, however, said that this is not the case based on the current negative adjustment seen yesterday. He mentioned: “This is purely a routine, annual event that just so happens to be in a bullish period for bitcoin, meaning that miners will do very well over the coming 14-day period.”

Based on the time of writing this article, the next adjustment is likely to take place on Nov. 15, 2020.

Ethereum Mining Difficulty Has Reached an ATH

Ethereum, the second-largest cryptocurrency by market capitalization has attained a new mining difficulty all-time high of 4,745,167,085,193,270 according to Glassnode’s on-chain data. The Ethereum mining difficulty is a measure of how many hashes in statistical terms must be generated to find a valid solution to solve the next Ethereum block and earn the mining reward.

The new all-time high figure depicts the number of hashes, the combined number of miners must attain to get the reward for an Ethereum block. With these, the Ethereum Network also trails the technical design of Bitcoin (BTC) in relation to periodical increment in the mining difficulty to bring in the perfect supply bottleneck to engender increased valuation over time.

Ethereum Mining Difficulty Amidst All-time High and Beacon Chain Launch

Ethereum has been experiencing significant milestones in the past days as this all-time high figure in the mining difficulty comes days after the price of Ethereum continues to show prospects of ballooning in a bid to beat its $1,460 all-time highs.

The new mining difficulty will all but help the Ethereum network maintain its relevance over time as the difficulty level will invariably make mining less attractive to the miners. This particular factor is poised to push the miners to switch to the Proof-of-Stake (PoS) system Ethereum is aiming to migrate to through the launch of its Beacon Chain.

Ethereum is at a crucial stage in its history, as the network aims to consolidate on all fronts especially in maintaining its relevance amidst the transition to the new PoS system. The anticipation of the new system dubbed Ethereum 2.0 has already spelled good omens for Ethereum, both in terms of valuation and positive sentiments in relation to the capability of the new system to support the growing hoard of decentralized finance (DeFi) applications.

Bitcoin Mining Difficulty Hits One Month High

Bitcoin’s mining difficulty has hit a new one month high, with the network metric rising for the third time in the past 30 days.

As gleaned from data platform, Coinwarp, The current Bitcoin difficulty is 17.62 T at block 697,657, resulting in a Bitcoin mining difficulty increase of 3.86 % in the last 24 hours.

The growing difficulty in the network has been adjusted twice from 14.4964 T back on July 31 and 15.5561 T earlier this month on August 13. The steady growth of the mining difficulty has showcased the gradual increase in the computing power plugged into the Bitcoin network after the major disruption from the Chinese clampdown on mining activities.

The mining difficulty, a metric of how hard or easy it is to generate new Bitcoin, is often impacted concerning the number of machines plugged into the network. The more the devices working to solve the block puzzles, the harder the difficulty and the reverse also holds. The Chinese offset plugged a record number of miners offline, forcing the difficulty to adjust itself.

Implications for Existing Miners

For Bitcoin miners operating from other regions other than China, the plunged mining difficulty is good news as it lowers the efforts required to generate new Bitcoins as a reward for helping to maintain the network.

The mining difficulty is still below the pre-China ban, and the entire engagement has proven more profitable to those currently in the business. With the bi-monthly adjustment of the mining difficulty, the attractiveness of the entire venture may be reduced as more miners find a home in regions like Canada, Kazakhstan, the United States and other emerging Bitcoin mining hotspots around the world.

Bitcoin is reacting negatively to the increment in difficulty as it is currently trading at $47,019.63 atop a 0.77% loss in the past 24 hours per data from CoinMarketCap.

Bitcoin Mining Difficulty Spikes 13.55%, Reaches New ATH of 35.6 Trillion Hashes

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According to the latest data collected from BTC.com, Bitcoin mining difficulty has increased by 13.55% since the last adjustment around two weeks ago.

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The current difficulty adjustment now takes 35.6 trillion hashes to generate one Bitcoin (BTC), a massive increase of 13.55% from the previous estimates. As per the data, the hike is the highest increase in Bitcoin mining difficulty since May 2021.

Source: BTC.com

The network rate now stands at 257 million TH/s (terra hashes per second), a massive increase over the 140 million TH/s it had at this time last year, BTC.com data indicated.

Despite pressure from declining prices being witnessed this year, the difficulty adjustment continues its steady rise while the competition among its miners has been growing. High difficulty means it takes more computing power to mine the same number of blocks and makes the network secure. An increase in mining difficulty also means that miners must put in more computing power in order to mine a block. And miners compete against each other for limited block rewards. With more participants and more computing power, the so-called “hashpower” of the entire network increases significantly, which is good for Bitcoin’s price in the long run.

Mining difficulty in the Bitcoin network is adjusted automatically every two weeks after 2,016 blocks have been mined in the network. The next difficulty adjustment will take place on October 24.

Increasing difficulty suggests more challenges ahead for Bitcoin miners who are already feeling the heat from the weak Bitcoin prices and higher energy costs. The bear market has been rough for the miners, who have seen profit margins shrink as Bitcoin prices crashed more than 50% this year while capital dried up and power prices surged.

Last month, one of the largest Bitcoin mining data centres, Compute North, filed for bankruptcy, citing the severe bear market, trouble with its largest lender, and supply issues. On Friday last week, Bitcoin miner Argo Blockchain raised $27 million after agreeing to issue 87 million shares to a sole investor in bids to ease liquidity pressures.

Bitcoin’s Mining Difficulty Jumps by 3.44%, Reaching New ATH at 36.84 Trillion

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According to fresh data from cryptocurrency analytics company CryptoQuant, Bitcoin’s (BTC) mining difficulty has reached a new record high.

Bitcoin’s mining difficulty rose by 3.45% at block height 760,032 to reach 36.84 trillion hashes on Sunday evening, October 22. The move was modest compared to the 13% increase witnessed earlier this month.

This means that not only is it 3.44% harder to find a Bitcoin block subsidy, but the network’s mining difficulty has also reached another all-time high (ATH) by reaching 36.84 trillion hashes.

The increase on Sunday follows the 13.55% increase in Bitcoin’s difficulty recorded as the network’s hashrate reached 35.6 trillion hashes on October 11th 2022. Blockchain.News reported the matter. The 13.55% increase was 2022’s largest Bitcoin difficulty rise.

The new increase in mining difficulty means more competition as more miners are entering to participate in the network and the mining process becomes more computationally demanding as more miners come on board. This also means that miners have to put in more computing power in order to mine a block.

The mining difficulty automatically adjusts every 2016 block, occurring roughly every two weeks in order to ensure a steady supply of newly minted coins. Therefore, the next difficulty update is scheduled to take place around November 6th.

Bitcoin’s mining difficulty reaching new high levels puts additional pressure on struggling miners who are witnessing declining profits. Higher difficulty means additional computing power is required to mine a new block. Data shows that miners have generated approximately $420 million in revenue this month. In September, miners brought in about $550.5 million in revenue, down 16.2% from the previous month.

Amid a bear period for the Bitcoin market, the hash rate and difficulty of mining new coins have reached an all-time high. This presents interesting new challenges and opportunities as mining firms, pools and individual miners look into the future. This period involved a trend of miner capitulation, as more individual and smaller firms started taking measures such as selling off all their mined coins for dollars to sustain their business operations.

Litecoin Mining Difficulty Hitting A New All-Time High Of 17.99 Million Hashes

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Litecoin mining difficulty has reached a new record level at just under 18 million hashes, according to a post released on Friday by Litecoin Foundation on CoinMarketCap.

The increase puts Litecoin mining difficulty at 17.99 million hashes at block 2,363,707 as of Friday November 5.

Just like Bitcoin, Litecoin uses the proof-of-work consensus mechanism method. Miners of both cryptocurrencies race to complete extremely challenging math puzzles using a hash algorithm in order to achieve consensus throughout their respective networks, win the right to add blocks of valid transactions to their blockchains, and earn block rewards.

The rise of Litecoin’s mining difficulty shows that competition among miners has increased, which is likely due to more miners joining the network. It means that cryptocurrency mining is becoming more popular and that making a worthwhile profit is getting harder.

The Bitcoin mining industry has become extremely competitive in recent years because of the massive surge of individuals looking to make a profit through mining the crypto.

Bitcoin is now the most challenging cryptocurrency to mine. Because Bitcoin itself is very valuable, the mining rewards are pretty hefty. Currently, the Bitcoin block reward stands at 6.25 BTC, equating to around US$130,000, as at the time of writing.

While increasing mining difficulty means that chances of making profits become more difficult, it is not always a bad thing. The higher a crypto’s difficulty, the more secure its network is. This is because a malicious group would need a huge amount of power to take over and control the network through a 51% attack.

Litecoin has experienced a rise in mining difficulty since 2020. While many miners find increasing difficulty levels very frustrating, as highlighted above this element of proof of work blockchains is undoubtedly vital. Without mining difficulty, these networks couldn’t maintain security and control their circulating supply as easily. So, while it may appear like a downside when it increases, it also serves an important role to the network and, therefore, to its users.

Litecoin Enters Top 20, Soared Over 28% in The Last 7 Days, Here Is Why

According to CoinMarketCap, Litecoin’s price shows an impressive bullish trend, which is worth analyzing. The token price has risen by 28.05% in the past seven days and has subsequently entered the top 20, as per the price-tracking website for crypto assets.

At the time of writing, the price of Litecoin (LTC) was $68.65, with a 24-hour trading volume of $1,400,844,453. The token has been down 1.59% over the last 24 hours. The cryptocurrency is ranked #19, with a live market cap of $4,912,922,846, according to CoinMarketCap.

On October 21, Litecoin was worth $51.18 per coin. Like many cryptocurrencies, the coin has been affected by the overall crypto market downturn and is down 74% in the past year and 65% year to date. In comparison, Bitcoin is down about 69% over the past year and 59% year to date.

Litecoin opened in 2022 at $150.80, and today it is down by 54.39%. At the time of writing, the LTC price is $68.65, up 0.76% from the previous trading day.

On November 1, the price of Litecoin jumped nearly 8% after the payments company MoneyGram enabled users to trade and store several crypto assets, including Litecoin, on its app.

Besides Litecoin, Moneygram also allows users to trade and store Bitcoin and Ethereum. However, with Litecoin having a much smaller market cap and much less of a following, the news did not move Bitcoin and Ethereum in the same way it boosted Litecoin.

Moneygram announced that users in almost all US states and the District of Columbia can purchase, sell and hold Litecoin and other cryptocurrencies. As a result, Litecoin has recently disassociated itself from altcoins and posted a massive rally against Bitcoin.

The price of Litecoin is rallying after temporary decoupling from the crypto market. The token has experienced an increase in the number of addresses holding 1,000 or more LTCs. Litecoin has added 314 new whale addresses; these wallets hold large volumes of LTC and contribute to a huge increase in on-chain activity.

The recent activity in Litecoin price comes after months of consolidation at the $55 level. Litecoin value is now past the key resistance level at $60, which has served as a barrier to a breakout on several occasions.

Besides the price boost, a few days ago, Litecoin mining difficulty set a new record high, peaking at just under 18 million hashes. Blockchian.News reported the matter on November 6. The rise in Litecoin’s mining difficulty means the competition rises as more miners enter the crypto network to reap the rewards.