Because of China’s crackdown on cryptocurrencies, mining bitcoin may become lot easier — and more profitable — in the near future.
Concerns about bitcoin mining’s environmental impact prompted Beijing to urge for action last month. Crypto miners have already fled to other regions, like as North America, as a result of this.
More than 90% of China’s bitcoin mining capacity, according to rumors, is expected to be shut down. China is considered to be responsible for 65 percent to 75 percent of all worldwide bitcoin mining.
While this may not be good news for bitcoin miners in China, it may benefit others.
What is bitcoin mining, and how does it work?
The image of a gold mine with picks and shovels is probably the first thing that springs to mind when you think of mining. Bitcoin mining, on the other hand, is nothing like prospecting for gold or other precious metals.
A large network of computers all around the world supports the digital currency. In the case of bitcoin, these computers are competing to solve complex arithmetic riddles so that transactions may be completed. This process also creates new bitcoins, rewarding successful miners in the cryptocurrency.
Miner rewards are now capped at 6.25 BTC. It used to be 12.5 BTC, but because bitcoin’s total supply is limited to 21 million, the quantity of bitcoin mined is half every four years.
Being the first miner to mine a new block — which is simply a list of bitcoin transactions — is a “game of random chance,” according to Alyse Killeen, the founder and managing partner of bitcoin-f.com.
It’s about to get a whole lot easier.
Following Beijing’s crackdown, the bitcoin network’s total hashrate, or processing power, appears to have plummeted.
According to Blockchain.com data, bitcoin’s hash rate has dropped in the previous month or two, from a high of 180.7 million per second in mid-May to roughly 116.2 million as of Wednesday.
Meanwhile, bitcoin’s network difficulty — a metric for how difficult it is to mine bitcoin — dropped from a high of over 25 trillion in May to 19.9 trillion last week. There is a temporal lag in the statistics because the mining difficulty is modified roughly every two weeks.
“The less mining equipment online, the lower the network difficulty,” Killeen explained. As a result, there is less rivalry for other bitcoins miner.
However, the price of bitcoin, which has fallen from record highs in recent months as a result of harsh comments from Tesla CEO Elon Musk and China’s crackdown on the industry, is another important element that impacts bitcoin miners’ income.
Since reaching a record high of about $65,000 in April, Bitcoin’s value has practically half. On Tuesday, the cryptocurrency dipped below $30,000, wiping out its gains from 2021, but has since returned to trade around $34,000.
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