Bitcoin Mining Records Largest Difficulty Drop Ever—Here’s What Miners Say

[Cristiano]

Bitcoin’s mining difficulty fell by 28% today, the largest drop in the network’s history. The decline shows the severe impact of China’s recent crackdown on its Bitcoin miners.

Mining difficulty measures the computational power required to validate Bitcoin transactions and consequently how hard it is to earn new Bitcoin. The network adjusts the difficulty each fortnight to reflect the level of competition among miners. Lower mining difficulty indicates less competition.

Today’s difficulty mining drop follows China’s crackdown on Bitcoin miners, which were responsible for an estimated 65% of the network’s hash rate. Well before the government started to shut down miners last month, Bitcoin’s hash rate peaked at 198 EH/s (i.e. a lot) on April 15. After the crackdown, the hash rate sunk to 89 EH/s.

Chinese miners are now emigrating en masse or selling mining machines to foreign mining farms. But until China’s Bitcoin miners find new homes, non-Chinese miners stand to benefit from the reduced difficulty, which makes it cheaper and easier to mine Bitcoin.

“All other miners who continue to operate gain a commensurate amount of market share and therefore daily block rewards,” Ben Gagnon, chief mining officer at Toronto-based Bitfarms, told Decrypt.

Peter Wall, CEO of London-based Argo Mining, told Decrypt that while miners in the West are trying to capitalize on the gap left by the Chinese crackdown, the market for mining sites is booming.

“Displaced Chinese miners are searching the globe for appropriate hosting sites for their machines, and that means, in places like North America, power and space are at a premium like never before,” he said.

The Chinese government crackdown and subsequent exodus of miners have contributed to a halving of Bitcoin’s price (from about $64k to $33k). The reduced hashrate also means that there aren’t as many computers backing the network, making it less secure.

But the crackdown is good for Bitcoin in the long run, said Josh Goodbody, who used to lead Huobi’s mining sales in the West before he became COO of crypto custodian Qredo. He said the network is now less reliant on the Chinese government.
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