What is the explanation for increasing the difficulty of mining (reducing mining profits)

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What does it mean to increase mining difficulty? Increasing mining difficulty refers to the increase or decrease in the block size of the Bitcoin network, which to some extent changes the speed and security of transactions in the Bitcoin network. According to BTC.com data, on October 14, 2018, Bitcoin’s total network computing power was 64.9TH/s, an increase of approximately 4.9% from its historical high of approximately 1 gigawatt in November. Therefore, with the rise of the price of Bitcoin and the continuous decline of the hash rate, it is difficult for miners to accept the situation. In order to avoid using a lot of power by ASIC equipment to mine Cryptocurrency, it becomes more difficult. The last time the difficulty of Bitcoin mining was lowered was in August 2012, when approximately 12.5 Ghash per THash per day was required for calculation, and now it has been 3 months since then. The difficulty of this increase can allow more machines to join the mining process, which can better protect their data from 51% attacks. But without such technical support, mining cannot continue because it only affects some very large parameters From a historical perspective, at the end of 2017, Bitcoin’s blockchain browser was always created using the concept of “software engineer”. So, when the mining difficulty of Bitcoin reaches a specific level, developers will write down this process and update it. That is to say, by adjusting software configuration to improve algorithm performance, more effective incentive mechanisms can be achieved and costs can be reduced. However, due to the fact that most mining machines are currently located overseas, it is difficult for many users to choose to turn off their old computers or switch back to the old mining machines. So a new method emerged – in some cases, setting the GPU to a higher graphics card to compete with existing mining hardware; But in another scenario, there may be a car upgrade issue similar to Tesla: using a “software engineer” approach to optimize ASIC chips. For ordinary investors, this approach is more secure and reliable In addition, many people have mentioned that the recent sharp drop in currency prices has led many people to seek new ways out. But we also see some players trying to sell their mining equipment in the market, switch to new market share, and other strategies to earn profits. For example, in the middle of February this year, Bitmain announced that it planned to restart the ant miner S9 series before the first quarter of 2020, and launch the ant S19 series again, the code of which is “M20”. Later, Canaan Creative released a product called AvalancheV2, which is expected to be officially launched at the end of December this year. In addition, according to the information source of the currency circle, “the Avalon team will soon release the latest Avalon 1.0 based on the new version of Ethash.”

Mining revenue reduction

Editor’s note: This article is from the Caiyun blockchain (ID: cybtc_com), and the Odaily Planet Daily is authorized to reprint it

With the decline of the price of Cryptocurrency, the mining income declined significantly. In the three months after Bitcoin halved, the average daily income per THash was $5.88/TH; Ethereum’s daily output of 2 ETHs is only 7.68. Therefore, although the price of Bitcoin maintains a relatively stable relationship with the overall network computing power, it can still generate high economic value According to data from BTC.com, the total value of digital assets excavated is approximately $600 million, which means that the price of Bitcoin is about half lower than all tokens currently in circulation, but its network hash rate has shown a significant decline. Due to the fact that the rewards for Bitcoin blocks have been reduced to around 0.5, mining profits have further decreased. However, the difficulty of mining and power costs remain a problem for Bitcoin It is estimated that in January 2019, more than 40000 Bitcoin addresses were added globally, accounting for over 40% of the total. This data is far higher than the growth level of 135000 BTCs, the highest point set in early November last year. At the beginning of 2020, the number of these new addresses exceeded 30 million and continued to rise; By the end of 2020, the number of new addresses will reach 1.4 billion, and it is expected to exceed 150000 new addresses this year; Meanwhile, in the first quarter of 2021, this number increased by 20%, reaching a historic high of 16500 addresses Nevertheless, if we assume that the entire industry will continue to adopt the PoW consensus algorithm in the future, the inflationary nature of Bitcoin will be significantly improved. However, in the past few years, Bitcoin has been increasingly accepted as a new form of currency. Essentially, when people start using Bitcoin, there will be some “speculative behavior” that affects the development of mining operations. “Because there is a lot of money invested in mining, Bitcoin mining has a great impact on the market.”

In fact, even in the current bear market environment, the word “digging” itself cannot achieve real Economic efficiency improvement: “If you want to decentralize your work to some extent or operate more safely,” an anonymous person named Cointelgraph explained. I think this is a very shocking place. Just like any other type of project, mining is also like this. However, many people point out that in certain aspects, mining can indeed bring many returns, such as reducing energy consumption, improving profitability, and so on, but this does not mean that you will not lose money.