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- China war on Cryptocurrency Mining leads to Hashrate Migration
- Satoshi anticipated this eventuality, and integrated the “difficulty adjustment.”
- Bitcoin’s built-in hashrate fluctuation mitigation works perfectly
China’s all-out war against cryptocurrency is being waged on numerous fronts. It has banned crypto-related activities on social media; its Central bank has forbidden financial institutions from trading in cryptocurrencies. It followed the above actions by banning Bitcoin Mining, citing environmental concerns, and now it has stopped all mining activities from regions with ample hydropower. So, where will China-based miners migrate? Do they have two options- Migrate to crypto-friendly states in the US like Texas and Kentucky or go to nearby nations like Kazakhstan and Russia?
Satoshi, the father of cryptocurrency, had anticipated this eventuality
The ban has led to a massive fall in hash power on the network. However, Satoshi, the father of cryptocurrency, had anticipated this eventuality while perfecting the crypto ecosystem built in a concept of “difficulty adjustment” into Bitcoin’s protocols, which allows for fluctuation in the composition of miners. The adjustment will probably take place tonight and will envisage one of the biggest adjustments ever made on the network.
Most futuristic features of the bitcoin ecosystem
Difficulty adjustment happens to be one of the most futuristic features of the bitcoin ecosystem. However, it is also one of the least appreciated features. It is a process by which the network makes any winning block easier or more difficult based on how much competition there is among miners. If many miners are working on the platform, the difficulty rider is raised, and if miners leave the network, the difficulty adjusts down.
Difficulty matters because it is a measure that takes into account the cost of capital expenditures as well as the cost of local electricity and determines if a particular rig is profitable to mine or not. If the difficulty levels are very high, the older archaic machines may be rendered useless, but they can become good again if the difficulty levels fall. The process is repeated every two weeks or 2,016 blocks, which is roughly two weeks at 10 minutes per block.
The biggest difficulty adjustment ever
Today the drop in the difficulty figure will hit 27%, which makes it the biggest difficulty adjustment ever. It is 50% more than the last big adjustment, 18%, all the way back in 2011. It has also been labeled as the third difficulty adjustment, which hasn’t happened since December 2018.
The most important characteristic of this exercise is that it will be flawless and incentivize the creation of more hash power to come back online, motivated purely by being more economical for them to do so. Difficulty adjustment revealed the visionary insight of Satoshi while designing the entire ecosystem. It is such a straightforward, spotless, ideal use of market motivation to keep everything running smoothly. It is flexibility personified.
The Bitcoin Mining Council has, in a report, said that 56% of the mining electricity mix is sustainable in Q2 2021. While the information has excited bitcoin fans, skeptics have questioned the integrity of the reports. However, if the figure improves to 50%, it will signal the beginning of Tesla accepting BTC as payment for its electric cars. Remember, Tesla had stopped taking BTC as payment due to environmental concerns. However, it said that it would start accepting the number one cryptocoin when half the VTC mining is done with renewable energy sources.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
