Bitrabo Editorial
On-chain data indicates that Bitcoin mining difficulty is expected to decrease by around 5% during the upcoming network adjustment, a welcomed change for miners.
Recent Slowdown in Bitcoin Network Block Time
“Mining Difficulty” refers to the level of challenge miners face when trying to add new blocks to the Bitcoin network. Its main function is to maintain a consistent block time of approximately 10 minutes for each new block added to the blockchain.
If miners are either too fast or too slow in mining, the network recalibrates the difficulty to restore the block time back to its target. These adjustments occur roughly every two weeks, with the next adjustment anticipated to occur tomorrow.
Data from CoinWarz reveals that miners have struggled to maintain the standard block rate of one every 10 minutes over the last few weeks.
Currently, the average block time has stretched to 10.52 minutes, indicating slower than optimal blockchain performance. Therefore, the network will implement a 4.91% difficulty reduction tomorrow. This adjustment will ease the process for miners, enabling them to find blocks more readily and improve the network’s efficiency.
The recent slowdown in mining can be attributed to changes in the Mining Hashrate, which tracks the total computing power utilized by miners on the Bitcoin network.
Below is a chart from Blockchain.com, detailing the 7-day average of this metric over the past year.
The chart shows that although the Bitcoin Mining Hashrate reached a new high earlier this month, it has since fallen sharply.
With a significant reduction in computing power, miners have become less efficient, prompting the network to lower the difficulty. If miners had increased their computing power during this time, the difficulty would likely have risen instead.
This reduction in difficulty will be beneficial for miners, as block time impacts their income directly. Miners earn through block rewards, which consist of both the block subsidy and transaction fees for successfully mining blocks.
The quicker miners can process blocks, the more revenue they can generate. However, the network’s aim to maintain a 10-minute block time caps miners’ potential earnings.
Even if miners were to double their computing capacity suddenly, they would only see an increase in their earnings for a limited period, as the Bitcoin blockchain would soon adjust the difficulty upwards accordingly.
This is fundamentally why difficulty levels are implemented—to prevent miners from endlessly boosting their power to mine blocks more quickly. Without such a mechanism, inflation could easily ensue, since the block subsidy is essential for minting new coins.
Current Bitcoin Price
As of now, Bitcoin is priced at approximately $63,400, reflecting a 4% increase over the past week.