Over the past several months, China’s decision to crack down on all virtual currency mining activities has plunged more than half of miners into the abyss when this is the world’s leading market for Bitcoin mining reserves.
But now, with the exodus of virtual currency mining groups from China, they have begun to adjust the Bitcoin algorithm to ensure the mining productivity of machines that are no longer in good working conditions. China.
Effective July 3, this amendment will help miners earn more. “This is going to be a big party for miners,” said Bitcoin mining engineer Brandon Arvanaghi.
Previously, to get Bitcoins, miners would use specialized miners to solve computational problems that allowed them to link blocks of transactions (blockchains) together. The reward paid for this work is Bitcoin aka “block reward”.
China has long been the focus and promise of the cryptocurrency market, with estimates accounting for 65-75% of Bitcoin mining globally. However, a crackdown by the government has completely banned all issues related to virtual currencies, causing Bitcoin miners to be expelled and go to other countries.
“For the first time in the history of Bitcoin operations, we had to completely stop mining in a prime area affecting more than 50% of the network,” said Darin Feinstein, founder of cryptocurrency mining company Blockcap. and Core Scientific, said.
More than 50% of the hashrate – an indicator of the computing power of miners around the world – has been shut down since the Bitcoin price plunge in May. Experts say more and more Bitcoin miners are shutting down. works because of China’s ban, which means that the remaining miners’ market share will increase in the network, making mining more profitable.
Normally, it would take miners about 10 minutes to complete a block chain, but the Bitcoin network at the moment has slowed down with algorithmic time increasing from 14 to 19 minutes.
To fix the problem, the Bitcoin code has been tweaked to reduce the mining difficulty by 28% – an unprecedented reduction – helping to restore block completion times to the 10-minute mark.
According to Mike Colyer, CEO of digital currency company Foundry, the Bitcoin algorithm can be programmed to handle the ups and downs of mining machines. “The Bitcoin market can self-regulate without going through any committee to authorize it. That’s what makes the cryptocurrency attractive,” he said.
“Bitcoin miners all share the same economy and are mining on the same network, so their revenue will grow thanks to this adjustment, as well as more mining scale,” Kevin Zhang, former Operations Manager at Greenridge Generation, America’s first major power plant, said.
Assuming the price of electricity stays the same, Zhang estimates that Bitcoin miners will earn $29 per day once the changes to the mining code take effect, up from $22 per day in the past.
In the long run, mining revenue will only drop 17% from Bitcoin’s April peak, while the coin’s value drops by 50%. In other words, the amount of Bitcoin mined will increase a lot compared to before.
“We are looking forward to the possibility of increasing revenue and profit in the near future. This is an unexpected gift to the network, not only in terms of revenue but also in terms of decentralization and sustainable energy metrics. “, Feinstein analyzed.
While the reduced difficulty benefits all miners, those using the newer tools will benefit the most. Most of the discarded equipment in China are old models, inefficient and operating at low profit margins, so this will be a great bargain for those who own a new generation of mining rigs. .
Six months of upheaval
It is difficult to predict how hashrate will behave in the future. Upstream Data founder Steve Barbour does not rule out the possibility that the Beijing government may reverse its policy and this is only a short-term fluctuation.
If this is a tough decision by the Chinese authorities, it will take 6-15 months for miners to move all their mining hardware to another country. “It will take a long time for the miners to find a new home,” Barbour said.
Even before China drastically cut off mining operations, producer Bitmain was still releasing a new generation of “buffaloes” every month, making the infrastructure to accommodate them overloaded.
Currently, the market is flooded with an oversupply of used mining rigs so other countries can consume these devices very quickly. Out of all the possible destinations for this device, the US seems to be well positioned to absorb the percent of hashrate that migrated away from China.
Many Bitcoin facilities in the US took advantage of this opportunity to sign deals with Chinese Bitcoin miners looking for refuge. Bitcoin mining activity in the United States is increasingly booming with the continuous flow of venture capital, so they are ready to take advantage of the migrating miners to make a profit.
“Many Bitcoin miners in the US were funded when the Bitcoin price started to rise in November, December last year, by the time the China ban came into effect, they had built everything up. great to exploit,” Arvanaghi said.
Smaller miners are also starting to take advantage of the current situation. “I think this is a signal that Bitcoin mining will be more distributed in the future,” Barbour said.
There will be fewer and fewer mega-miners with a capacity of over 100 MW commonly found in Texas, with many instead in small commercial and even residential areas. It would be difficult for a politician to close a mine in a people’s warehouse.”