The wind of change is blowing through The Bitcoin landscape. On March 14, 2024, the network experienced a monumental change as mining difficulty skyrocketed to a record high of 84 trillion hashes. This unprecedented challenge coincides with another significant event on the horizon: the Bitcoin halving scheduled for April.
According to BTC.com, since the previous modification, this indicator has increased by nearly 5.80%. The mining hashrate of the original coin has also peaked, indicating that more people are now participating in the mining process. Currently, this value is 617 EH/s.
Source: BTC.com
Bitcoin Mining: A Difficulty Dilemma
Bitcoin mining is not an simple task. Miners compete to solve sophisticated cryptographic puzzles, and the difficulty of these puzzles adjusts based on the overall hash rate of the network. As more miners join the network, the difficulty increases to ensure a constant rate of block production (approximately 1 block every 10 minutes).
This recent boost in difficulty means an influx of novel miners, likely attracted by the recent surge in Bitcoin prices, which peaked at a staggering $73,800 on the same day.
Halving effect
Coming halving the April event introduces another variable into the equation. Every four years, miners’ block reward – the amount of Bitcoin earned for successfully mining a block – is halved.
This economic policy is the cornerstone of Bitcoin’s design, which aims to control inflation and maintain scarcity over time. The last halving in May 2020 witnessed a significant price boost in the following months and many analysts believe that the upcoming halving will follow suit.
BTCUSD weakens today and trades at $68,178: TradingView.com
Here’s the logic: as the supply of novel Bitcoins is halved, there are relatively fewer existing Bitcoins, potentially causing the price to boost due to increased demand.
Balancing act for miners
Despite increasing difficulty, the potential for Bitcoin’s price boost after halving may encourage miners to weather the storm. This economic incentive is reinforced by the recent boost in mining awards, which has reached almost $79 million
This suggests that even with increased difficulty, miners are still making significant profits due to Bitcoin’s high price. However, the long-term sustainability of this model is questionable.
As the difficulty continues to boost, the energy consumption required for mining will also boost. This raises concerns about the environmental impact of Bitcoin mining, especially given the reliance on non-renewable energy sources in some regions.
Beyond the headlines
The narrative surrounding Bitcoin’s recent surge often focuses on its price and the upcoming halving. However, there are critical factors that must be taken into account.
Ever-increasing mining difficulties raise questions about the long-term feasibility of proof of work, Bitcoin’s current consensus mechanism. Alternative, more energy-efficient mechanisms are being explored, but their widespread application remains uncertain.
Featured image from Unsplash, chart from TradingView
