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- 1 Bitcoin Mining Difficulty is set to go high with an increase in the number of miners.
- 2 As hash rates go high, the mining difficulty will increase.
With Bitcoin mining turning out to be the next gold rush, experts predict that the mining difficulty is set to rise again soon. With more and more miners joining the network and a surge in the deployment of high-powered mining rigs, the difficulty is expected to rise to new highs in the coming weeks, says BTC mining monitoring platform Coinwarz.
Bitcoin Mining Difficulty to be More Difficult
According to the BTC algorithm, one block should be mined in 10 minutes. With more and more miners competing to complete the task, the difficulty will rise automatically. This setup makes it difficult for the miners to find a block. To counter this increased difficulty, extra hash power is required.
The scenario is similar to mining coal, which is initially closer to the surface and can be mined with mediocre mining equipment. However, as time goes by sophisticated and bigger machinery is required, increasing the mining difficulty. If multiple miners are competing for the same price, the one with a bigger mining rig will gain more coal and more money.
However, the installation of bigger and more advanced machines takes a serious toll on the profit margins. Similarly, to fight against the higher hash rate, miners would require heavy pieces of machinery or mining rigs to mine blocks, and the increasing energy costs would add extra costs.
Currently, the BTC mining difficulty is close to an all-time high of 52.35 million hashes. Experts point toward the possibility of a 1.78% jump in the value, leading it all the way to 53.33 trillion hashes. If so, this increase would be the third time in this month alone.
Mining difficulty is directly promotional with the yield of miners. However, certain investors think that this rise might cause a considerable surge in BTC prices. This difficult scenario becomes even more important at the time of halving, which is expected in April 2024. In such a scenario, mining rewards would be halved from 6.25 BTC to 3.125 BTC.
Bitcoin Halving & Its Effect on Mining
According to the BTC protocol, the reward for successfully mining a block is divided by two after every 21,000 blocks or approximately four years. This block number is expected to be reached in April 2024. BTC miners are already facing the problems of rising energy prices, swelling difficulty levels, and unexpected volatility in BTC price action.
The first halving took place on November 8, 2012, reducing the mining reward from 50 BTC to 25 BTC. The second iteration was on July 9, 2016, when the rewards dropped to 12.5 BTC. The third halving took place on May 11, 2022, halving the reward to 6.25 during the next iteration.
The current reward for successfully mining a block is 6.25 BTC which is worth $168,421.88, and after the next halving in 2024, the reward would drop to 3.125 BTC and will be worth $84,210.94. The Head of Research at Blocksbridge, Wolfie Zhao, in his research on BTC mining,hints at the hidden difficulties that such a situation would cause for miners.
Currently, a miner spends anywhere between $10,000 to $15,000 per BTC in maintenance, energy bills, etc. After the halving implementation, this amount would rise to $20,000 or $30,000 per BTC. If the price of BTC is not considerably above $30k, the miners face significant losses to their income.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
