It’s no longer news that the Bitcoin network’s hashrate has been declining for weeks just when the cryptocurrency renewed its uptrend. As recently as November 3, Blocdesk reported that the hashrate declined to 107 exohash per second. The hashrate is a fundamental security metric that measures the processing power on the Bitcoin network. Amid the significant drop in the hashrate lately, the network posted a negative adjustment in Bitcoin mining difficulty today.
Bitcoin Sees 16% Drop in Mining Difficulty
On-chain analytics platform, Glassnode, reported the drop on Tuesday. From the information shared, the network had a 16 percent mining difficulty adjustment. This decrease accounts for the biggest negative adjustment on the network over the past nine years and the second-largest since Bitcoin’s inception. The most significant drop was recorded in October 2011 at -18%, according to Glassnode.
We just observed the 2nd largest negative #Bitcoin mining difficulty adjustment in history: -16%
It topped the -15.9% change in March this year.
— glassnode (@glassnode) November 3, 2020
The closest adjustment to the record today was in March this year. The difficulty dropped by 15.9%. Two months later, Bitcoin underwent its thrid block reward halving, reducing rewards to 6.25 BTC per block.
Bitcoin Mining Difficulty Explained
The Bitcoin mining difficulty adjustment is another important security metric to gauge Bitcoin network security. It measures the level of competitiveness required for miners to win block rewards. As miners continuously install ASIC machines for mining, the Bitcoin hashrate increases as a result. These machines make Bitcoin mining easier, given how they output a much higher processing power. Upgrading constantly is necessary to remain competitive on the network.
To avoid the alteration of the Bitcoin mining rate, however, the mining difficulty metric was introduced to act as a regulator. Thus, with every increase in the hashrate, the network posts an increase in the difficulty as well. A drop in Bitcoin mining difficulty follows a decline in the overall network’s hashrate. This way, the effect of the increases/decreases in network hashrate gets balanced.
This explains the development today. Notably, Bitcoin miners have been – allegedly – pulling off their machines as the dry season approaches. As they halt operations in search for a favorable region, the hashrate gets affected and declines significantly as a result. Perhaps, this resulted in the big drop in the mining difficulty today, in order to balance the network security. This change in hashrate does not impact the overall network security of Bitcoin in any quantifiable way.
Following this change in mining difficulty, it remains to be seen if the overall hashrate will recover. It is perfectly normal for the Bitcoin network to go through ups and downs. For now, the network remains close to a mining capacity of 100 exohash per second. A significant decline compared to recent weeks, but nothing insurmountable.