Data on the chain shows that as the difficulty undergoes negative adjustments, the Bitcoin bridge has risen again.
Bitcoin miners seem to have resumed their expansion mode
On Saturday, May 3, the Bitcoin network experienced its latest difficulty adjustments and provided miners with simplified issues, breaking four consecutive wins ahead of that. The “difficulty” here is a built-in feature of the BTC blockchain, which basically controls the difficulty of miners finding it on the network. The value of this indicator varies according to the speed at which miners perform their duties.
The chain automatically adjusts its difficulty every two weeks, and the rules written by Satoshi for its basic adjustment are simple: keep the block time consistent for about 10 minutes.
This means that when miners pass through blocks at a fast speed of 10 minutes per block, the chain is forced to increase its difficulty. Likewise, if the validators are slow, it must simplify the problem so that they can reach the standard speed.
When the total computing power they use (called hashrate) changes, miners’ tasks are faster or slower. As shown in the following figure at Blockchain.com, miners are in a phase of rapid expansion, which is why BTC has to strengthen the difficulty four times in a row.
The trend in the 7-day average of the BTC Hashrate over the past year | Source: Blockchain.com
Now, the existence of difficulty has had a significant impact on Bitcoin miners: No matter how much they invest, they cannot collectively withdraw more block subsidies than the network allows.
The “Block Subsidy” is a BTC reward received by miners as it will be compensated for adding a block to the network. It makes up for the main part of miners’ income, with transaction fees accounting for a smaller part.
Since difficulties always restore miners to a rate of 10 minutes per block, these validators continue to receive about the same amount of this reward every day, regardless of the Hidea on it.
In other words, whenever hashrate goes up, higher computing power competes for the same income as before (note that it is correct after the next difficulty adjustment; miners may make money in the middle period differently than the norm during the next period).
This suggests that, theoretically, validators who fail to scale proportionally to global Bitcoin load growth lag behind competition and earn less income due to the limited collective BTC income of miners.
Miners who suffer from income squeeze after difficulties increase may end up having no choice but to disconnect from the network. From the Hashrate chart, it is obvious that the value of the indicator collapsed in the last third of April. A substantial increase may be what triggered it.
As the difficulties now finally observe a cooldown to cope with this decline in Hashrat, miners may be encouraged to increase their facilities again. In fact, the latest trend in the 7-day average of the metric average has been pointing in this direction so far.
BTC price
Bitcoin has been recovering over the past few days as its price has dropped to $93,900.
Looks like the price of the coin has been showing bearish action in the last few days | Source: BTCUSDT on TradingView
Featured images from dall-e, charts from blockchain.com, tradingview.com
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