On August 12, 2016, a bitcoin mine near Kongyuxiang, Sichuan, China. Getty Images | Paul Ratje | The Washington Post Bitcoin mining has suddenly gotten a whole lot easier and more rewarding. For months, the world has known that China’s crackdown on bitcoin mining will result in more than half of the world’s bitcoin miners going dark. Now that it’s happened, the bitcoin algorithm has been updated to ensure that miner productivity does not continue to plummet. This change, which went into effect early Saturday morning, implies that a lot more money is flowing to bitcoin miners who are still online. “This will be a revenue party for miners,” said Brandon Arvanaghi, a bitcoin mining engineer. “They’ve suddenly gotten a bigger slice of the pie, which means they’re earning more bitcoin every day.” Mining has been simplified. A bitcoin miner uses a computer software to attempt to solve a riddle before anyone else. Solving the riddle completes a block, which creates new bitcoin while also updating the digital ledger that keeps track of all bitcoin transactions. China had long been the epicenter of bitcoin miners, with estimates estimating that the country accounted for 65 percent to 75 percent of global bitcoin mining, but a government-led crackdown has effectively expelled the country’s crypto miners. “We had a complete shutdown of mining in a particular geographic zone that affects more than 50% of the network for the first time in the bitcoin network’s history,” said Darin Feinstein, creator of Blockcap and Core Scientific. Since the market top in May, more than half of the hashrate – the total computing power of miners throughout the world – has left the network. Because there are fewer individuals mining, fewer blocks are solved each day. Normally, a block takes around 10 minutes to finish, but according to Feinstein, the bitcoin network has slowed to block times of 14 to 19 minutes. This is why bitcoin re-calibrates every 2016 blocks, or roughly every two weeks, resetting the difficulty of mining. The bitcoin code automatically made it around 28% easier to mine on Saturday, a historically unprecedented drop for the network, bringing block times to the optimal 10-minute window. According to Mike Colyer, CEO of digital currency business Foundry, the bitcoin algorithm is intended to accommodate an increase or reduction in mining devices. “It’s a self-regulatory market that makes decisions without the help of an outside group. This is an extremely powerful idea “he stated Because there are fewer competitors and the difficulty is lower, any miner who plugs in a machine will notice a big improvement in profitability and more predictable revenue. “Because all bitcoin miners are on the same network and share the same economics, both public and private miners will see an increase in revenue,” said Kevin Zhang, former Chief Mining Officer at Greenridge Generation, the first major U.S. power plant to begin mining behind-the-meter on a large scale. Zhang forecasts revenue of $29 per day for individuals utilizing the latest-generation Bitmain miner, compared to $22 per day previous to the upgrade, assuming fixed power costs. Longer term, while miner income can fluctuate with the price of the coin, Zhang pointed out that mining profits have declined only 17% since the bitcoin price peaked in April, while the currency’s price has dropped nearly 50%. “We foresee considerably stronger mining profitability for Compass Mining clients in the coming months,” said Whit Gibbs, CEO and creator of Compass, a bitcoin mining service provider. “We anticipate a 35 percent increase in profitability for miners.” Feinstein of Blockcap agrees. “For the near future, we anticipate a rise in revenue and profit. Not only in terms of cash, but also in terms of decentralization and sustainable energy metrics, this was an unexpected gift to the network.” Although all miners will benefit from the difficulty reduction, those who use newer equipment will benefit the most. According to Feinstein, the majority of the equipment that was turned off in China was old-generation technology, which is inefficient and has substantially lower profit margins. Surge of six months It’s difficult to say how long the hashrate shortage will endure. According to Barbour, it’s entirely feasible that Beijing will simply reverse their approach, and that this will only be a temporary setback. If not, most mining crypto experts think that migrating all of that idle and relocated mining hardware will take anywhere from six to fifteen months. “It’ll take a long time for the surplus to find a home,” Barbour said. According to Gibbs, miners should expect more revenue for the rest of 2021. “Every day, Chinese miners explore the globe for locations where they can restart their machines. At the present, there is a scarcity of room “Colyer stated. According to Feinstein, part of the difficulty is that there was already a paucity of infrastructure to house the new-generation miners being deployed monthly by Beijing-based manufacturer Bitmain before China shut down mining. It’s difficult to determine how quickly countries will be able to absorb the surge of equipment now that the market is swamped with an oversupply of old mining rigs. “Some mining companies have everything built and are only waiting for these ASICs to plug in, which should take a couple of days,” Arvanaghi stated. “Others may require the construction of containers, the expansion of warehouses, or the expansion of power capacity. The hashrate will not return to its previous levels overnight, but it will gradually increase over the next few months “He went on to say more. The United States appears to be the best-positioned of all the probable destinations for this equipment to absorb any errant hashrate. According to CNBC, prominent U.S. mining companies have already signed agreements to repatriate some of these stranded Bitmain miners. Bitcoin mining in the United States is flourishing, and startup funding is pouring in, so the industry is well positioned to take advantage of the miner migration, according to Arvanaghi. “Many U.S. bitcoin miners were funded when bitcoin’s price started climbing in November and December of 2020, which means they were already building out their power capacity when the China mining ban took effect,” he said. “The time is perfect.” Barbour, on the other hand, feels that much smaller competitors in the U.S. home market have a chance of grabbing these surplus miners. “I believe this is a hint that bitcoin mining will become more spread in the future due to necessity,” Barbour added. “More little mines on modest commercial and eventually residential sites, rather than mega-mines like the 100+ megawatt ones we see in Texas. A politician will have a lot tougher time shutting down a mine in someone’s garage.”/n
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