On-chain data indicates that Bitcoin mining difficulty is poised to drop by around 5% in the next network adjustment, a development that is likely to be welcomed by miners.
Bitcoin Network Block Time Has Been Slower Than Normal Recently
The term “Mining Difficulty” refers to the level of challenge miners face when trying to mine blocks on the Bitcoin network. The primary goal of this metric is to ensure that the interval between each block being added to the blockchain, known as the block time, remains consistent at approximately 10 minutes.
Whenever miners’ pace deviates from this standard, the network adjusts its difficulty to bring the block time back to the target. These adjustments occur approximately every two weeks, with the latest one scheduled to come into effect tomorrow.
According to data from CoinWarz, miners have struggled to maintain a rate of one block every 10 minutes over the past couple of weeks. The average block time has been recorded at 10.52 minutes, indicating that the Bitcoin blockchain has been operating slower than intended. Consequently, the network is set to reduce its difficulty by 4.91% tomorrow.
Understanding the Mining Hashrate Trend
The slower mining pace can be attributed to the trend in the Mining Hashrate, which measures the total computing power miners have connected to the Bitcoin blockchain. Below is a chart from Blockchain.com that illustrates this metric’s 7-day average over the past year.
The chart reveals that the 7-day average Bitcoin Mining Hashrate reached a new peak earlier this month. However, the indicator’s value has since experienced a sharp decline. With reduced computing power, miners have naturally become slower in their tasks, necessitating this upcoming difficulty adjustment.
Had miners increased their computing power during this period, the difficulty would have been set for another increase instead. The reduced difficulty will be a relief for miners, as block time directly influences their revenue. Miners earn their income through block rewards, which include the block subsidy and transaction fees, received as compensation for solving blocks.
Impact on Miners’ Revenue
The faster miners can solve blocks, the more revenue they can generate. However, the network aims to maintain a block time of around 10 minutes, limiting how much miners can earn. Even if miners were to double their computing power overnight, they could only sustain that increased pace for a couple of weeks before the Bitcoin blockchain adjusts the difficulty to bring them back to the standard rate.
This mechanism is crucial to preventing miners from indefinitely increasing their power to mine blocks faster. Without this feature, the cryptocurrency could easily succumb to inflation, as the block subsidy, a main component of the block reward, represents how new coins are minted.
Current BTC Price
At the time of writing, Bitcoin is trading around $63,400, reflecting a 4% increase over the last seven days. The price action has shown some stagnation recently.
For more detailed insights and up-to-date information, always refer to reliable sources and keep an eye on the latest trends in the market.
