Bitcoin: Mining Difficulty Drops to Historic Low

It had been a long time since Bitcoin miners were surprised by such a mining difficulty adjustment.

What is mining difficulty?

The Bitcoin protocol regularly adjusts the difficulty of mining transaction blocks. To be precise, every 2,016 blocks, which is approximately every two weeks under normal circumstances.

This recalibration (“difficulty adjustment” in English) aims to ensure that blocks are mined roughly every 10 minutes regardless of changes in the number of miners.

If more miners join the network, difficulty increases to slow block production. And vice versa. If miners leave the network, difficulty decreases to speed up block production and return to the rate of one block every ten minutes.

“Mining” means frantically varying a nonce (an arbitrary number) which, once hashed by the SHA-256 cryptographic algorithm with the block’s transactions, produces a hash.

This hash is essentially a number. “Mining a block” involves finding, through trial and error, a number less than a target value. It is this target value that is adjusted every 2,016 blocks based on the time taken to mine the previous 2,016 blocks.

For example, if the last 2,016 blocks were mined in more than 20,160 minutes, the target number will be modified to slow down the rate at which miners find blocks. And so on.

On average, it takes 480,000 trillion trillion attempts (hashrate) to mine a block and receive the 3.125 BTC reward. In our example, this means fewer attempts on average will be needed to find a block.

On June 29th, the adjustment was 7.50%. We hadn’t seen such a recalibration in several years.

Why?

This is the most significant adjustment since the famous 2021 “ban,” when Chinese authorities abruptly forced many miners to shut down. The adjustment then was 28%.

The cause was a collapse of the hashrate from 175 EH to 85 EH. In other words, over 50% of miners were Chinese in 2021. This time, the hashrate drop was more moderate, from 942 exaHash to 782 EH.

Some attributed this adjustment to bombings of Iranian nuclear plants. Iran, being disconnected from the SWIFT network, has been using Bitcoin for several years to pay for its imports. Perhaps this partially explains it.

However, the hashrate drop seems mostly linked to the Texas miners’ curtailment program. Explanation:

Texas realized that Bitcoin miners help energy providers smooth out sudden consumption spikes, such as during heat waves.

It is indeed difficult to anticipate energy demand during the hottest hours of summer or the coldest of winter. This results in keeping peak power plants ready just in case. These plants remain idle most of the time but still incur costs.

The idea is to replace these peak plants with Bitcoin miners who can instantly and as long as necessary provide power back to the grid.

The recent hashrate drop is due to temperatures in the US being 5 to 8 °C above averages. With about 40% of computing power (hashrate) located in the US, it is unsurprising to see a drop in hashrate.

Bitcoin, the luxury fuse

Miners stand out for their unique ability to consume a high base load and reduce consumption during peaks. Is there anyone at RTE (French electricity transmission network) working on this subject?

Balancing the power grid through demand is essential to accommodate the growth of intermittent energy sources and the puzzle they represent at lower costs.

The presence of miners eliminates blackout risks and reduces energy costs by providing an outlet for intermittent energies otherwise subsidized. And let’s not talk about nuclear plants being damaged to accommodate solar and wind.

Bitcoin is a demand-side adjustment variable that benefits everyone. It is an excellent load-shedding solution to real-time balance electricity demand and production.

Over 57% of Texas miners opted out on demand in 2023, returning a total of 888 GWh to the grid. This symbiosis works so well that the grid operator has canceled the construction of several peak power plants. Thanks to the 3 GW miners can provide at any time.

In France, deputies continue to ignore calls to mine using nuclear power plants. Another absurdity, Norwegian miners are under threat while the north of the country is flooded with excess hydroelectric power.

Finally, the heat produced by the Bitcoin industry can also be recycled. Many projects are underway, notably in Scandinavian countries:

Cherry on top, the Bitcoin industry is the greenest in the world at over 52%, constantly increasing. The reason is that the cheapest electricity comes from renewable energies.

Don’t miss our article: No blackouts with Bitcoin miners!