Last Updated: May 3, 2021
The difficult of mining for Bitcoin has decreased to 12.6%, which is the biggest downward correction of 2021. This is largely due to huge mining outages in China. Mining difficulty is the process of how challenging it is for miners to locate and unlock the next block for Bitcoin blockchain. The difficulty rating is changed to make sure that blocks are attached at a good rate. The average is every 10 minutes.
The drop is a result of the hashrate loss that Bitcoin experienced, because of the coal mining accidents and audits in China. Miners have lost their main energy source, meaning that the area went offline and the hashrate dropped.
CEO of Compass Mining, Thomas Heller, said, “The 12.6% difficult drop is the largest negative difficulty adjustment since 2012, excluding November 2020 (end of hydro season), March 2020 (Black Thursday) and December 2020 (end of hydro season), meaning that it’s a great time to be a miner. The drop is primarily caused by the inspections and associated power outages in Xinjiang, and although the majority of mining farms in the regions have recommenced mining, the network hashrate has not quite reached all-time high again.”
Some of the miners are back online, and the hashrate has bounced back to an extent, but more miners need to recover for things to be as they were.
CFO of Luxor, Ethan Vera, said, “The event in Xinjiang highlights that a majory portion of hashrate production still occurs in China. Seasonal and government changes have the potential to swing hashrate levels and have profound impacts on network difficulty and mining economics. Bitcoin’s difficulty adjustment algorithm is working exactly as planned, compensating for slower bock times with a downward adjustment. While the 2,016 block epoch is not perfect, it has been battle tested against all sorts of events and always done its job.”
The correction is due to place miner profitability beyond 40 cents per terahash, meaning roughly 90% mining margins for the average Bitcoin miner.