Bitcoin has had a difficult past week, and it doesn’t appear like things will get much better soon. It is anticipated that bitcoin’s hash rate and mining difficulty would rise by 6.8%, reaching a record high.
Increased hash rate
Since January 2022, competition among miners has reached a height. Additionally, since August, the hash rate of bitcoin has increased, reaching a current high of 6.8%. The number of kids who join the network after a several-month capitulation phase is in doubt. A rise in operating expenses followed this automatically.
Recall that the hash rate gauges the strength of a network, such as the bitcoin one. Contrarily, difficulty quantifies how much work is delegated to miners in a proof-of-work system. In more concrete terms, there are a number of activities they must complete in order to contribute a block to a blockchain and thus earn bitcoins. Keep in mind that the challenge also contributes to a consistent inflation rate.
Reduced from 9.1 to 10 minutes per block
In actuality, a high hash rate makes things more difficult. In a similar vein, increased difficulty will result in a greater hash rate. It will be able to maintain the average block production time on the blockchain at roughly 10 minutes by modifying the difficulty in this manner. Analysts predict that the difficulty of mining bitcoins will increase to 6.8% the following week.
The difficulty had reached 28.35 T for a block height of 749,952 at the time of the August peak, which is why this peak comes after it. This is a 10% decrease from the peak of 31.25T that was reached in May 2022. Following a rise in difficulty, the block time, which was 9.1 minutes, was increased to 10 minutes.
By 6.8%, extraction difficulty will increase.
The consulting firm Blocksbridge predicts difficulty to increase by the greatest since the year’s beginning, reaching 6.8%. Thus, the measure should surpass the prior high. Keep in mind that the extraction difficulty is adjusted around every two weeks.
The advice group also predicts that aging equipment will make the bearish move more difficult for miners. This is happening as the price of bitcoin is hovering around $20,000. As a result, the block subsidy—i.e., the rewards given to miners for extracting a block of transactions—will be impacted. The miners must therefore extract more blocks in order for their work to remain viable. Indeed, after reaching record highs in the fourth quarter of 2021, the price of bitcoin has decreased by more than 60%.
Operating expenses of 22%
Data analyzed on August 22, 2022 showed that bitcoin’s hash rate was over 246 exahashes per second, which boosted the security of the blockchain. To recoup their costs, miners can also sell the bitcoins they have already produced.
Remember that the latter rose by almost 22% in the second quarter, adding to the price’s downward pressure. In an effort to raise money to pay off their debts, other miners have chosen to sell equipment. In particular, this applies to Stronghold Digital Mining.