For the second time in the History, Bitcoin Difficulty Factor has dropped down indicating less competition among Bitcoin miners. Recently official data indicated that the Bitcoin difficulty factor declined by a margin of 15.95 percent.
Bitcoin Difficulty Reduces for the Second Time since 2009
The latest decline in Bitcoin mining difficulty factors indicates a decline in the level of competition within the Bitcoin mining community. Bitcoin miners use insanely powerful computers to compete in solving a series of complex maths equations to be rewarded by Bitcoin. The network’s difficulty factor is dependent on the amount of hashing power deployed in the network.
Miners are rewarded for every block they successfully confirm. Currently, miners earn 12.5 BTC per block this will also change after the upcoming halving. Due to global calamities which limited the supply of new bitcoin mining equipment and caused a decline in price, many miners were forced to shut down their mining operations leading to reduced competition.
The mining difficulty factor reduction occurred at around 3:00 UTC on March 26 to 13.91 Trillion units from 16.55 Trillion units. The last decline in the Bitcoin mining difficulty factor occurred in December 2018 after the cryptocurrency price crash. The decline was recorded at 15.13 percent, which was by then the largest shift in the Bitcoin mining difficulty algorism.
The Bitcoin mining difficulty factor is automatically adjusted after every 14 days when 2016 blocks are found on the network. This is meat to maintain the average block time in the network at approximately 10 minutes. In circumstances where a significant number of hashing power is removed from the network, it is difficult to readjust atomically to maintain the 10 mins block time constant. In the same way, when more hashing power is levied on the Network, the difficulty factor automatically adjusts, increasing itself leading to fewer rewards to miners.
Miners continue to be squeezed
Although the mining difficulty factor went down, Bitcoin miners will continue to struggle to break even in the mining operations. This is because just before the Bitcoin price crash of March 12, the difficulty factor had clocked to an all-time high around March 9. This caused miners to earn the meagre value of Bitcoin while paying a constant cost of operations.
The Recent Decline in Bitcoin price forced many older models of mining ASICS out of operation meaning miners are to replace new machines. With low Bitcoin prices, High mining difficulty factoring general small Bitcoins, closed ASIC factories due to COVID-19, miners were unable to continue operations profitably.
Now the average block time of time is estimated at 12 minutes, which means it will take another 17 not 14 days for a difficulty factor readjustment to occur. This means miners will need to wait up to three additional days than usual before they could confirm more blocks while const remain constant.