Bitcoin mining difficulty just reached a new milestone, with a difficulty of 17.6. The record shows that miners remain bullish after the halving.
— PlanB (@100trillionUSD) August 24, 2020
How Is Bitcoin’s Mining Difficulty Calculated?
Bitcoin’s mining algorithm is based on proof-of-work (PoW). Miners need to guess a randomly generated number called the ‘nonce.’ This operation will produce a string of numbers or hash, that has a certain number of zeroes.
A longer string of zeroes means that its harder to guess the nonce, in other words, more difficulty. And greater difficulty attracts more mining resources to power the network. The Bitcoin blockchain is now more powerful than ever.
For comparison, back in December 2017, when bitcoin was at an all-time high in price, the network difficulty was 1.9 trillion. That’s 9.25 times lower than the difficulty witnessed today.
Not All Good News for Miners
China is home to some of the biggest Bitcoin mining operations in the world. And as BeInCrypto reported recently, China is suffering from one of the worst flooding seasons of the last decades.
The Three-Gorge Dam, the biggest on the planet, has been at risk of overflow for weeks. Inundation of the Yangtze River could halt dozens of Bitcoin mining operations in the area.
Indeed, floods have already affected the hash rate, which allegedly dropped by 20% due to heavy rain.
Around 10-15 EH/s has dropped off from Chinese pools in the past 24 hours.
Reason: Due to a heavy rain (red) warning, power station(s) need to cut off power to avoid flooding.
Sichuan mining unpredictable as always!
— Thomas Heller (@thomasheller_) August 17, 2020
Are These Bullish Signs?
Yes, they are. Higher difficulty means less profitability for Bitcoin miners, so the cost of mining BTC is going up. If the floods cause some mining operations to go offline temporarily, that would slow the supply of freshly mined bitcoins even more.
Miners will have to invest in more advanced hardware to keep being profitable. For now, this hardware arms race is securing the network at unprecedented levels.
A more secure network will be more appealing to traditional investors and institutional money. Miners willing to invest in hardware is a clear bullish sign since they’ll be able to sell their bitcoin at a profit.
— ToxicView (@ViewToxic) August 24, 2020
According to Satoshi Nakamoto’s vision, expressed in the original Bitcoin whitepaper, price should follow scarcity. Expect some interesting times ahead in the next few months.