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Bitcoin Mining Difficulty Sees Sharpest Decline in 7 Years

Bitcoin mining difficulty was adjusted downwards 15.13% on 3 December 2018, the sharpest percentage decrease in difficulty since November 2011, and by far the biggest downward adjustment in difficulty by magnitude. This follows a 7.39% downward adjustment on 16 November.

Overall, Bitcoin’s mining difficulty has fallen from 7.45 trillion in early October to 5.65 trillion currently. This has coincided with a decrease in Bitcoin’s hash rate from a record high of 62 EH/s to 32 EH/s as of 2 December. This implicitly suggests that 30 EH/s of Bitcoin’s mining hash rate, which represents billions of US dollars of mining equipment, has been turned off due to no longer being profitable. The driving force behind this is the fall in Bitcoin’s price from USD 6,500 to the USD 3,500-4,000 level during the latter half of November 2018.

The Bitcoin mining difficulty adjusts every 2,016 blocks, which is roughly every two weeks, in order to maintain Bitcoin’s block time at 600 seconds. This is because if Bitcoin’s hash rate rises, then block times become shorter at constant difficulty, and if Bitcoin’s hash rate decreases then block times become longer. Indeed, Bitcoin’s block time had risen to 700 seconds before the most recent difficulty adjustment took effect, so the Bitcoin network was much slower than usual this past week. Without difficulty adjustments, the total supply of 21 million Bitcoins would have been mined already, which would have led to strong downward pressure on Bitcoin’s price, as well as a quick end to the Bitcoin mining industry as we know it. Further, this would lead to the Bitcoin network being much less secure, which is unacceptable, and a primary reason as to why periodic mining difficulty adjustments are essential.

The downward difficulty adjustment is actually good news for Bitcoin miners that are still mining, since the 20% decrease in mining difficulty over the past month directly correlates to a 20% increase in Bitcoin mining revenues per unit of hash rate. Increases in mining profits will likely be short-lived, however, since a significant fraction of that 30 EH/s of rigs which have been shut off due to lack of profitably will likely be turned on again.

Logically, the 20% increase in Bitcoin mining profits per unit of hash rate is a good environment for new miners to enter the game, but the abundance of mining rigs in the world that are sitting idle will probably beat new miners to the punch.


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One of the Largest Cryptocurrency Mines in North America Begins Hashing

After months of planning, DMG Blockchain Solutions has begun mining for cryptocurrency at one of the largest cryptocurrency mines in North America. The mine is in a 27,000 square foot building in British Colombia, Canada, and has begun operations with 60 MW of power, with plans to ramp up to 85 MW – all clean hydroelectric energy that is off-grid. This is enough electricity to power 50,000 homes.

Assuming this new cryptocurrency mine uses the most efficient Bitcoin mining chips – the 7 nm chips that were developed by Bitmain which operate at 0.042 W/GH – the mine will operate at 1.4 Exahash/s at 60 MW, and 2 Exahash/s at 85 MW. With the current Bitcoin network hash rate averaging 50 Exahash/s, this represents 2.8-4% of the total hash rate. Doing a rough calculation, this new cryptocurrency mine would produce 50-70 Bitcoins per day, worth USD 320,000-440,000 per day. This may be an overestimate since the mining facility might not be using 7 nm chip technology, and some of the electricity may be used for other infrastructure associated with the mining farm.

One interesting thing to note is the creator of Bitcoin, Satoshi Nakamoto, was able to mine 50 Bitcoins every 10 minutes with a simple personal computer that barely used electricity. Ten years later today, it takes a 34-acre mining farm using 60 MW of electricity to produce 50 Bitcoins in a day.

It has taken a year to build this cryptocurrency mining supersite. A road and a new power substation had to be produced for the site, since the mining operation uses its own power grid fed by hydroelectric power, and does not interact with the normal consumer grid of British Colombia.

The CEO of DMG Blockchain Solutions, Dan Reitzik, said, “DMG now proudly owns one of the largest, most cost-efficient, bitcoin mining facilities in North America – and we’re doing it in a responsible way with the local community. It was an audacious undertaking, but DMG’s executive team has been in the mining space for years, and we have the know-how and connections with the utilities and government agencies to pull it off.”

On a final note, the creation of cryptocurrency mining supersites like this new one in British Colombia may be forcing individual miners out of the Bitcoin mining game permanently.


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Bitcoin Mining Hash Rate Plateaus Near 50 Exahash/s

The Bitcoin mining hash rate, a measure of the total mining power securing the Bitcoin network, has been at a plateau near 50 Exahash/s since August 2018. This follows three years of rapidly accelerating hash rate on the Bitcoin network, indicating a shift in the mining industry.

In late July, the Bitcoin mining hash rate first exceeded 50 Exahash/s but has not escaped that level since. For three straight months, hash rate has been consistently averaging 50 Exahash/s, dipping to as low as 40 Exahash/s, and reaching the all-time record 62 Exahash/s briefly.

There are three factors which impact the profitability of Bitcoin mining, which could explain this plateau in the hash rate: Bitcoin’s price, cost and efficiency of mining rigs, as well as mining difficulty. The higher the price of Bitcoin, the more money miners make. The price of Bitcoin is very clearly correlated to this hash rate plateau, since the last significant Bitcoin rally peaked at over USD 8,500 in late July, and was completely equalized by early August when the price returned to USD 6,500. That is when mining hash rate stopped increasing ad Bitcoin has been steady in the USD 6,000-7,000 range ever since.

Bitcoin mining difficulty has increased from 6 trillion in late July to over 7 trillion as of the beginning of November. The higher the difficulty, the less revenue each unit of mining hash rate receives. Considering that the hash rate has not risen for three months now, the relatively low price of Bitcoin combined with higher difficulty has likely made it unprofitable to expand mining operations, even for major companies like Bitmain. The mining difficulty actually declined from 7.45 trillion to 7.18 trillion throughout October 2017, the first decline in difficulty since November 2017.

Bitcoin mining technology has been improving, with the biggest announcement being 7 nm rigs being produced by Bitmain. These are the most efficient mining chips in history but apparently,

the increase in efficiency of Bitcoin mining rigs does not outweigh the lack of price increase and high mining difficulty.

It will probably take a significant Bitcoin rally to boost the mining hash rate above the 50 Exahash/s plateau.

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Bitcoin Mining Revenue Recording Highs but Profits Dwindle

Bitcoin mining revenue is at record levels according to Diar, with the first six months of 2018 exceeding all of 2017 due to increased Bitcoin prices. Through September 2018, there has been USD 1.4 billion more profits in 2018 than 2017, and there’s still a quarter of the year to go. However, rising hash rate combined with decreasing Bitcoin price throughout 2018 has caused profit margins for Bitcoin miners to decline drastically.

Bitcoin mining revenue is the same between 2017 and 2018 of course but on average, prices were higher in 2018, with prices ranging from USD 17,000 to USD 6,000 during 2018, while during the first nine months of 2017, prices were below USD 5,000. Miners have mined USD 4.7 billion of Bitcoin during 2017 so far, with more than USD 1 billion of profits during January 2018 alone when Bitcoin prices were highest.

Despite record Bitcoin mining revenue in terms of USD, hash rate has been continually increasing. Bitcoin mining difficulty has risen from 2 trillion to 7.5 trillion during 2018, as hash rate has increased from 13.8 Exahash/s to 53.4 Exahash/s. This means that Bitcoin mining has become 275% more difficult during 2018, while Bitcoin prices have simultaneously declined more than 60%.

This is a double whammy for Bitcoin miners, since Bitcoin miners have to buy more rigs to keep up, costing them more electricity, and there’s been generally less revenue month over month due to Bitcoin’s price decline. The popular S9 Antminer from Bitmain had an 86% profit margin in January 2018 if power costs USD 0.10 per KWh, and this has declined to practically 0% profit by September 2018. This means that all Bitcoin mining rigs less profitable than the S9 Antminer cost more electricity than the revenue they earn and are probably shut off at this point, and S9 Antminers might be unprofitable depending on local electricity costs.

This highlights a general trend that is occurring, where personal miners are being pushed out of the Bitcoin mining game. Large mining firms like Bitmain are building supersites that have tremendous amounts of mining power in one location, and are able to position their supersite in a location with cheaper electricity, and buy or build the rigs at prices below wholesale. Diar estimates that big mining operations are still making 50-60% profit, and this will drive a continued increase in Bitcoin’s network hash rate.

However, for personal miners, who often pay USD 0.10 per KWh or more for electricity and retail cost for rigs, Bitcoin mining is quickly becoming unprofitable. This represents a paradigm shift in the Bitcoin mining industry, from being a business anyone could profitable partake in with proper equipment, to being profitable only for massive mining companies.


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Bitcoin Network Healthier Than Ever as Hash Rate Rises Rapidly, Despite 60% Price Drop Since December

The Bitcoin network is healthier than ever as its hash rate continues to grow nearly exponentially in the long term, despite the tremendous 60% price drop from 20,000 USD to 7,500 USD since December 2017.

Miners cryptographically hash transactions into blocks and add them to the blockchain, and this is how the Bitcoin network is maintained and secured. Miners receive freshly minted from the block reward and transaction fees in return for their efforts, and this has become a very popular source of income in the cryptocurrency world.

The hash rate is the amount of cryptographic hashes processed by computers per second  and is a good measure of the total processing power Bitcoin miners are contributing and is perhaps a good measure of the health of the Bitcoin network for a couple of reasons. The difficulty of hashing increases as hash rate rises, and therefore as hash rate rises Bitcoin becomes more cryptographically secure. Also a rising hash rate indicates that Bitcoin is becoming more popular, since more people are dedicating processing power to trying to obtain Bitcoins through mining.

In the long term the hash rate has been rising practically exponentially, going from about 800,000 TH/s at the beginning of 2016, 2 million TH/s at the beginning of 2017, to 16 million TH/s at the start of 2018, and now sits near 31 million TH/s. This is a good metric of how Bitcoin has been spreading globally and it’s use rising exponentially during that time.

Bitcoin’s price hit an all-time record high near 20,000 USD per coin in early December 2017, and since then has been on a pretty swift decline which has brought it down to 7,500 USD per coin at the time of this writing. Hundreds of billions of dollars have exited the Bitcoin market as a result. Despite this huge 60+% price drop, the network hash rate has gone up approximately 140% from 13 million TH/s to 31 million TH/s at the same time.

This rapid rise in mining power on the Bitcoin network indicates that the consensus of miners think Bitcoin won’t be dropping in the long term, or they wouldn’t be investing tremendous amounts of money into their Bitcoin mining equipment.

The rise in hash rate also suggests that Bitcoin continues to be the #1 cryptocurrency and is the cryptocurrency that most miners decide to focus their efforts on since it has been and continues to be the gold standard of the cryptocurrency world.

Bitcoin is by far more widely used than any other cryptocurrency, since it is the first and truly the essence of what a cryptocurrency should be from the time it launched in 2009. It is cryptographically secure, and allows users to send money anywhere in the world instantly for anything they want to purchase, and is a lot more private than any other long-distance payment method like banks or Western Union.

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