The news came out in May that China is really behind bitcoin (BTC) miners would engage. The mining ban has been implemented over the past few months with province after province closing the doors of major data centers. This had direct consequences for the network. But a few months later and luckily we see some positive signs again! In Timo’s take this week, I take a look at the mining industry and why this is key evidence that Bitcoin is here to stay.
“Longest negative streak ever”
That Chinese miners their rigs switching off was immediately visible on the hash rate, or computing power, of the Bitcoin network. He almost immediately started a dive shortly after the news. In May, another record was set of 180.6 million terahashes per second (TH/s). Just over a month later, the computing power had already dropped to 84 million TH/s. In a very short time, a large part of the bitcoin miners went offline.
To prevent transaction times from getting too long and the network from being endangered, Satoshi Nakamoto, the mysterious Bitcoin creator, has come up with something clever. Every two weeks the difficulty adjusted. The difficulty is an automatic mechanism that determines how difficult it is to mine bitcoins. If more miners participate, the difficulty goes up. If many miners go offline, like in recent weeks, it goes down to encourage other miners to join again. In this column you can read more about how the difficulty works.
The Chinese ban triggered two historic events in this area. For example, we saw the largest difficulty adjustment ever in Bitcoin history of just under -28%. In addition, the last four adjustments (which take place every two weeks) were negative. This marked the longest negative streak ever. It was proof that the network indeed saw a large part of the miners go offline in one fell swoop.
Bitcoin bounces back and proves an important point
At the time this column is published, the nieuwe difficulty adjustment probably already been. As it looks now, after four negative adjustments, we are finally getting a difficulty increase of about 5% again. Due to the decreased difficulty, miners in other parts of the world have started mining more and new miners have joined the network. Also, large Chinese mining companies have now got their affairs in order and they have moved their mining machines to other countries.
In short, computing power is increasing again and the Bitcoin network is as expected not dead. Bitcoin is a decentralized network that is mostly secured by the hard work of miners. The fact that they are completely mobile and only need an internet connection and power means that they can go almost anywhere they want. No country can put so much pressure on Bitcoin and its miners. That makes Bitcoin untouchable and therefore a robust and fair form of money.