What’s the Situation with Unstable Mining Power? (What’s the Cause of Low Mining Power?)

08/19/2023 09:36 • Blockchain Briefs • 61 views

What’s the situation with unstable mining power? Mining power fluctuations are a factor that affects miner profitability.

The process of mining Bitcoin involves investing a portion of the coins into a specific machine for mining. However, when this behavior occurs, the increase in price leads to a decrease in the amount of coins mined, resulting in an increased demand for the digital asset. This generates a certain amount of income and profit. If the cost is too high, it can cause the entire network to become paralyzed (such as in cases where a large amount of electricity is required to operate nodes or maintain servers) or the increasing mining difficulty leads to a more expensive and costly mining process. Therefore, similar situations can arise.

For those who want to hold cryptocurrencies long-term, the simplest method is to buy some altcoins and sell them for more profits. However, this does not mean they are completely exiting the market. Instead, most people shift their focus to other projects. Therefore, in essence, many investors continue to hold the coins they have invested in and choose to accumulate more. As the price of the coin rises and the bear market arrives, many people start to turn to BTC and other mainstream digital assets as a new storage method. Currently, most users still hold BTC, but there are not many new investment targets available for purchase.

Another common phenomenon is the continuous decline in mining power. This is because a considerable amount of funds has flowed into this field over the past few months, and these funds have been invested in various DeFi projects. Some tokens have even experienced a significant decline in price, such as SNX and AAVE, with a large drop in their token prices. (Note: There have been two 51% attack incidents on the Ethereum network since February this year).

What’s the Cause of Low Mining Power?

Editor’s note: This article is from Caixun Blockchain (ID: cybtc_com) and is authorized to be reproduced by Odaily Star Planet Daily.

Recently, Ethereum’s mining power has dropped by about 15% because no new nodes have joined the network in the past 24 hours, resulting in fewer mining pools. This may be because some people believe that the price of Bitcoin will reach $100,000 or even higher, but they actually just want to position themselves for the next bull market.

However, when there is enough data to support this situation, problems may arise. If someone really needs the answer to this problem, they must consider the security of the network, especially in terms of its cost and stability.

Although most cryptocurrencies rely on mining equipment such as ASIC chips and smart contracts, these data often affect prices and cause price fluctuations. Therefore, for many investors, choosing the cheapest hardware is not a good thing.

With the development of the crypto industry, we have seen more use cases, among which the most important one is companies that use lower electricity to run infrastructure have gained a lot of profits. However, the major operators in the current market are not satisfied with this demand. They rely on lower but higher electrical costs to provide power for their companies, while the revenues of other companies go wasted. This is because miners are looking for new sources of profit to sustain their operations. (Note: A new type of graphics card miner dedicated to mining Bitcoin was launched in July.) According to statistics, from January to the end of June 2020, there were approximately 150,000 computer developers worldwide dedicated to the crypto field.

In addition, as the Bitcoin network continues to grow every day, it is usually positively correlated with transaction fees. According to BitInfoCharts data, as of May 31, the average daily hash rate was 90.7 GHz/s, with a difference of nearly 100 MH/s.

Historically, the percentage of hashing power owned by “miners” has been increasing and has now reached a new historical high. However, some opinions suggest that this trend is likely due to the impact of the BTC block reward halving events or the influence of Bitcoin price declines, such as ETH2 or LUNA collapses, and so on. Of course, there is also a saying that mining companies have shown great interest in the market because people expect the price of BTC to rise in the coming years, and this consensus will continue to change depending on the current market conditions of Bitcoin.

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What’s the Situation with Unstable Mining Power? (What’s the Cause of Low Mining Power?)

What’s the Cause of Low Mining Power?

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