The mining difficulty seeks to maintain a uniform rate of block generation for BTC, even if the hash rate swings more dramatically.
The network’s overall cost had declined dramatically even before China’s bitcoin mining crackdown announcement. Therefore, Bitcoin’s mining difficulty experienced a noticeable decline around Sunday midnight UTC time. The most recent Bitcoin difficulty adjustment saw the mining difficulty reduce by 5.51 percent at block height 687,456. This represents a 16 percent dip from its previous all-time high on May 13 as it went down from 25 trillion to 21.04 trillion. According to statistics, the hash rate has plummeted to 19.93 Million TH/s, the lowest level since January. Surprisingly, since the difficulty level has remained consistent with that of January, the price has risen to a comparable level. Despite a wildly variable hash rate, the mining difficulty is how the network seeks to ensure blocks being created at an equitable rate. To meet the shifting hash rate, it makes the mining process easier or tougher every two weeks.
Furthermore, between May 13, the latest mining difficulty adjustment date, and May 21, when reports came that Chinese miners in Xingjiang’s Zhufing Economic and Technology Development Zone had been given orders to shut down activities. Famous Chinese mining pools were severely impacted, with hash rates plummeting by at least 20%. Bitcoin’s average block production interval climbed to 11.8 minutes. The average hash rate between May 13 and 21 had already plummeted to roughly 147 EH/s, which was 18 percent quicker than the Bitcoin network’s anticipated 10-minute block creation period. The seven-day moving average hash rate has been generally stable at 150 EH/s since the China State Council’s remark on Friday last week.
The obvious result of the announcement, according to Chinese reporter Colin Wu, was the delayed manufacture of blocks. On June 11, due to a reduction in hash rate, no blocks were created for 1 hour and 45 minutes, said Wu.
Yunnan Province’s Energy Bureau has announced that it would finish eradicating illegal Bitcoin mining by the end of June. They did clarify, however, that hydropower regions like Sichuan and Yunnan will tolerate Bitcoin mining better than thermal power zones like Xinjiang and Inner Mongolia. Whereas some miners have begun to migrate from Northern Chinese cities to Sichuan’s hydroelectricity center, the power stations in Sichuan have been limiting supplies to energy-intensive businesses such as mining farms owing to this year’s torrential downpour. As a result, there has been an increase in public demand for power, which has had to be prioritized.
Despite the declining hash rate, the price of BTC increased by 9.5 percent, while the rest of the market only increased by 7%. The largest cryptocurrencies have pushed beyond the $40,000 barrier for the first time since May 27. The next difficulty adjustment is scheduled for two weeks, and according to BTC.com, the difficulty may be reduced by 5.51 percent. Meanwhile, some Chinese bitcoin miners are seeking energy capacity outside of China in order to move their equipment out of the country in order to guard against future regulatory difficulties.
It’s unclear whether or not the Sichuan government would respond to the State Council’s high-resolution signal to tighten down on bitcoin mining activity. Unlike its counterparts in Inner Mongolia, where the majority of electricity is derived from fossil fuels, the Sichuan administration is conducting a conference next week to determine the effects of a simple ban on the local hydropower sector.