Despite a rough week for bitcoin, the competition between miners approaches its highest level since January 2022.
Hash rate and difficulty are up in August 2022 as miners rejoin the network after a months-long capitulation phase accompanied by rising operating costs.
Hash rate measures computing power on a network such as bitcoin’s network. Its value is often estimated.
Difficulty measures how much work miners in a proof-of-work system must do before adding a block to a blockchain and earning bitcoin. It is also responsible for maintaining a steady rate of inflation.
A higher hashrate implies greater difficulty and vice versa. The goal in adjusting the difficulty is to keep the average time for creating a block at approximately ten minutes.
Miners with inefficient equipment could still capitulate
In August 2022, the difficulty hit 28.35T at a block height of 749,952, down 10% from the previous high of 31.25T in May 2022. The average block time reached 9.1 minutes, signaling a potential increase in difficulty to take the block time to ten minutes. Consultancy firm Blocksbridge expects the difficulty to spike 6.8% in the most significant increase for the year-to-date, which could see the metric surpass the previous record. Mining difficulty is adjusted approximately every two weeks.
But Blocksbridge has cautioned that miners with older equipment may suffer as bitcoin’s price struggles around the $20,000 mark, affecting block subsidies, part of the revenue paid to miners for successfully “mining” a block of transactions. The firm said the bear market is especially tough on those miners with inefficient mining computers or ‘rigs.’
With bitcoin prices down over 60% from all-time highs in Q4 2021, miners must mine more to remain profitable. As a result, bitcoin’s hashrate stood at more than 246 exahashes per second as per data reviewed on Aug. 22, 2022, strengthening security on the blockchain.
Other miners like Stronghold Digital Mining have sold mining equipment to raise funds to pay off debt.
Ethereum miners out of a job
Ethereum, whose hashrate spiked in August, offers miners about four times the reward for successfully adding a block to the network. But Ethereum’s migration from a proof-of-work system to a proof-of-stake system means that some miners may either revert to mining bitcoin or migrate their equipment to one of Ethereum’s rumored proof-of-work hard forks.
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