Bitcoin’s (BTC) most recent mining difficulty adjustment went upwards, instead of following a downwards trend which it had been since the past few months. This, according to data from Bitcoin Wisdom and Blockchain.com.
Mining “difficulty” is a term used to refer to how easy (or difficult) it may be for cryptocurrency miners to solve complex math equations, in order to validate a block of transactions on proof-of-work (PoW)-based networks such as the Bitcoin blockchain.
Only Miners With “Access To Extremely Low Electricity Costs” Can Afford To Mine
As CryptoGlobe reported in early December 2018, a sharp and continuous decline in the BTC price would result in most miners having to mine at or below the cost of electricity, a Bloomberg study had concluded. As explained by the news media outlet, the miners’ breakeven point (a few week back) was at roughly $4,500, with the exception of a select group of miners who were able to significantly reduce their operational costs.
Miners with access to “extremely low electricity costs” and “very specific business models” would be able to carry on their mining activities while making profits, according to Bloomberg’s research and interviews with industry participants. Notably, data had shown miners leaving the Bitcoin network, which was evident from the declining hashrate and decreasing mining difficulty due to unprofitable mining.
As covered, bitcoin mining had been consolidating to fewer and fewer entities including BTC.top, ViaBTC, SlushPool, AntPool, and BTC.com – while unknown BTC miners accounted for only 3.8% of the flagship cryptocurrency’s hashrate (down from an all-time high of about 40%).
Five Downwards BTC Mining Difficulty Adjustments In 2018
Significantly, there had been repeated downwards adjustments since July 2018 to the bitcoin mining difficulty level as the digital currency’s price dropped and miners required lower costs to avoid losses from participating on the Bitcoin network. In total, there were five downwards adjustments last year, which is more than what was recorded in the past seven years. The first adjustment occurred in July, one in October, another in November, and two in December.
On December 3rd, the largest downwards adjustment was recorded at 15.1%, which came following reports that a large number of miners had been abandoning the BTC network due to uncertainty regarding the long-term profitability of mining the pseudonymous cryptocurrency.
Despite concerns from many members of the crypto community, Alistair Milne, the chief information officer at the Digital Currency Fund, tweeted to his followers:
Remember the Bitcoin mining death spiral FUD? Mining difficulty just adjusted +10%.
Milner also shared some notable statistics (via Twitter) regarding BTC’s hashrate:
Remember the Bitcoin mining death spiral FUD? Mining difficulty just adjusted +10% pic.twitter.com/aAhENjWGFS
— Alistair Milne (@alistairmilne) December 31, 2018