Confidence in the veracity of Bitcoin was renewed yesterday, despite the worst performing year in its ten-year history, with the stabilization of the token hashrate through difficulty adjustment.
This does not mean this year’s bear market is finally on the upswing. It does, however, indicate demonstrated sustainability without manual intervention — a concept fiat money systems have been unable to approach.
Confirmation of the BTC hash rate self-stabilization has friends of Bitcoin absolutely elated, with experts and industry influencers such as Frank Young unable to stop themselves from comparing the smooth operational capacity of their beloved Bitcoin to the latest news and controversy from the Fed surrounding fiat money and the ongoing and largely unavoidable interest rate drama.
$BTC #hashrate has stabilized via difficulty adjustment. When you watch news coming from Wednesday's Fed meeting ask yourself, "which approach is more sustainable?" The "politically driven opinion of appointed Fed officials" or "math"? @saifedean #hodl #thebitcoinstandard pic.twitter.com/DSvAbqwsdN
— Frank T Young (@FrankTYoung) December 19, 2018
Young has been the Chief Product Officer at Global Payments (GPN) for the past three years, so his stake in Bitcoin — and, more importantly, the difficulty adjustment capacity — is high. Global Payments is exactly what its name suggests; a facilitator of payment processing for enterprise-level growth across a range of industries.
Global Payments has been offering cryptocurrency payment solutions, specifically in Bitcoin, to its merchants worldwide for over four years now. In 2014, Global Payments established a referral agreement with the industry leader in digital currency business solutions, BitPay, thus incorporating bitcoin payment acceptance into its product suite. On paper, four years of doing business do not seem significant. In reality, it is approaching half the span of Bitcoin’s existence.
All about that hash
Why have Young and other Bitcoin proponents reacted with such enthusiasm to the news from Bitcoin?
Hash rate is the number of hashes, or computations, performed by the network per second. Another way of looking at it is as a measure of how much power the network is consuming to remain functional at the standard mean time of 10 minutes.
Over the past year, with the price of Bitcoin dropping over 80 percent, miners of the cryptocurrency have faced an array of difficulty, ranging from operational setbacks to complete cessation of mining. This has resulted in a drop in Bitcoin’s hash rate over the past few weeks for the first time since the onset of the Bitcoin bubble, which began late in 2017, with Bitcoin approaching the long-anticipated unicorn price of $20K USD.
Now, according to data monitoring center and cryptocurrency wallet provider Blockchain, the hash rate has begun climbing again, all by itself. This stabilization is the biggest downward difficulty adjustment in seven years. The fact that BTC is still hovering around $4,000 USD and the hash rate has still achieved this stabilization is remarkable.
Math vs. Politics
In yesterday’s tweet, Young refers to this phenomena as, essentially, math over politics and, in reality, the timing could not be more ironic with the Fed announcing an interest rate hike following its last meeting of the year this week. This is the fourth interest rate hike in 2018, and there will be more to come.
Economic growth factors such as the employment rate, stock market, political climate, bond portfolios, and trade agreements all factor into the Fed’s decisions to raise or lower interest rates in the U.S. In reality, it is ultimately the decision of a fallible group of human beings, traditionally men — although, during the Obama administration, Janet Yellen became the first woman to chair the Fed. To think that outside influence, as well as personal bias, does not factor into decision making would be naive.
Young and others compare this accepted norm for fiat money oversight to the decentralized solutions offered by cryptocurrency. It is easy to see their point of view. This self-sustaining system offered by Bitcoin and decentralized cryptocurrencies, powered by blockchain technology, is appealing.
Hashrate is inextricably linked to miner rewards and computational difficulty. Because both reward amounts (12.5 BTC) and computational time (ten minutes) remain fixed, these other three factors are in a constant state of flux to maintain the network. Yes, this is a lot of math — but, despite the mathematically complex nature of hash rate, the absence of human error makes for a refreshingly simple currency adjustment rate.
Think this hash rate stabilization spells the end of the bear market for BTC? Or is more correction in the cards? Let us know in the comments below!
Disclaimer
In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content. Please note that our Terms and Conditions, Privacy Policy, and Disclaimers have been updated.
