Bitcoin mining difficulty, a metric that shows how hard it is for miners to find new Bitcoin blocks and earn rewards, has seen a small jump after its dramatic 13% increase two weeks ago.
At 03:05 CEST on Tuesday, mining difficulty, adjusted biweekly based on data from several mining sites, increased 4.5% at block 699551. “Difficulty” refers to the relative measure of the amount of resources required to mine Bitcoin. This metric is adjusted up or down depending on the amount of power consumed by the network (or “hash rate”) at a given time. Bitcoin’s protocol is set to adjust the difficulty level every 2,016 blocks, or roughly every two weeks, to ensure that new blocks are mined at a fixed rate.
Bitcoin mining is becoming more costly as the mining difficulty is driven by the large amounts of available computing resources dedicated to mining, as well as more competition among miners to find new blocks. However, according to miners and mining pool operators, Bitcoin’s recent bull run has offset the rising costs and made Bitcoin mining highly profitable.
“The price is increasing faster than the difficulty,” said Daniel Frumkin, a researcher at Prague-based Bitcoin mining company Slush Pool. The good news is that the price is rising, which means that while revenue in BTC terms is falling, mining revenue in fiat remains stable, Frumkin added.
In late July, the Bitcoin price seemed to have recovered from China’s pressure on crypto-asset trading and mining. After falling below $30,000 on July 20, Bitcoin managed to break the psychological resistance level of $50,000 again last week.
The hash price, a measure of Bitcoin mining revenue in fiat currency, bottomed out in the bear market of summer 2019. Margins on mining operations have increased by over 80% since then, according to Nick Hansen, CEO of Seattle-based mining company Luxor.
Bitcoin’s recent bull run, as well as its record revenue margin, is partly due to the Chinese State Council ordering local authorities to shut down crypto-asset mining sites in May. This shutdown resulted in the decommissioning of nearly one million mining machines in China. However, as the space for miners competing to find new blocks suddenly shrank, miners who could stay online outside of China found themselves much more successful and profitable.
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