Bitcoin [BTC] has borne the effects of the Bitcoin Cash hash war and the prolonged bear market, as it is clearly visible in its hash rate and mining difficulty charts. The difficulty of Bitcoin mining has plunged by a massive ~31.5% since its all-time high in December 2017.
Bitcoin is not the only currency to bear the brunt of the bear’s looming presence over the market, altcoins such as XRP, Ethereum and Litecoin were also pictured bleeding because of the bear’s attack. Additionally, the short-term holiday-rally frenzy seems to have come to an end, as all the coins have slumped and are painted in red.
The mining difficulty for Bitcoin reached its all-time high in the month of October, residing in that position for quite some time. Now, mining difficulty has decreased by a massive 31.50% from ATH, in comparison to the current difficulty.
Even though the difficulty has seen a significant dip, the hash-rate continues to grow, leaving several enthusiasts in a state of confusion as the difficulty and hash-rate are directly correlated.
The difficulty level is adjusted every two weeks, as a total of 2016 blocks have to be mined, according to the Whitepaper. So, the drop in the difficulty while the hash rate is increasing is due to the lag that is inherent to Bitcoin’s technology.
Bitcoin’s protocol are self-adjusted and it accounts in a way that when the miners abandon mining due to higher break-even costs, the difficulty is reduced and so is the hash rate. In order to make the miners start mining again, the reward for mining goes up, and hence the balance is maintained.
Moreover, people who stay on-chain during these toughs time are rewarded with higher block rewards. So, the drastic drop in difficulty might have attracted miners back to the market as the price of Bitcoin went from a low of $3,122 to over $4,000 in the past week.
There are people who criticize the algorithm that is used in Bitcoin. Meni Rosenfeld tweeted:
“The difficulty retarget algorithm in Bitcoin is terrible. It fails to achieve its stated goal – 2016 blocks every 2 weeks – in several ways: It’s not balanced over long periods of time. It’s not surprising that the algorithm is terrible – there’s no indication that Satoshi knows anything about control theory, which is essential for designing systems like this.”
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