In the field of digital currency, Bitcoin has always been a hot topic that has attracted much attention. Recently, Bitcoin’s mining difficulty dropped by 6%, and this news has attracted widespread attention in the market. As mining difficulty decreases, the computing power of the entire network may continue to decrease. What impact will this have on the Bitcoin ecosystem and future development? This article will explore this issue in depth.

In the Bitcoin network, mining difficulty is a key parameter, which directly affects the mining speed and computing power distribution of Bitcoin. When the mining difficulty decreases, it means that mining becomes easier, but it may also cause more computing power to leave. This phenomenon may further exacerbate the decline in network computing power, thereby affecting the stability and security of Bitcoin.

As we all know, the value of Bitcoin is closely related to network computing power. As computing power declines, some uncertainties may arise, and investors and currency holders may feel market fluctuations. In this case, the price of Bitcoin may be affected to a certain extent and even trigger panic in the market.

Not only that, the continued decline in network computing power may also challenge the decentralized nature of Bitcoin. Bitcoin's decentralization is one of its greatest advantages, and the decline in computing power may lead to a small number of miners mastering more computing power, thus exacerbating the trend of centralization. This will pose a threat to the long-term development and survival of Bitcoin.

In addition, the decline in network computing power may also affect the confirmation speed and security of Bitcoin transactions. As computing power decreases, transactions may take longer to confirm, which may cause inconvenience and risk to users. Especially during peak trading periods, congestion may occur, further affecting user experience.

In response to this problem, the Bitcoin community and development team need to take corresponding measures to maintain the stable operation of the network. The network computing power can be balanced by adjusting protocol parameters, optimizing algorithms, etc. to ensure the normal operation of the Bitcoin system. At the same time, it is also necessary to strengthen the monitoring and adjustment of computing power distribution to avoid extreme situations.

Overall, a 6% drop in Bitcoin mining difficulty could trigger a chain reaction that would have a profound impact on the Bitcoin ecosystem. In this context, all parties need to work together to ensure the stability and security of the Bitcoin network and promote the healthy development of the digital currency industry. It is hoped that Bitcoin can overcome various challenges in the future and embrace a brighter development prospect.

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The difficulty of Bitcoin mining has been reduced by 6%, and the computing power of the entire network may continue to decline! The dust of Bitcoin’s third halving has settled. On-chain data shows that the computing power of the entire Bitcoin network has dropped significantly in the short term; in the medium and long term, the upcoming flood period will be a follow-up benefit.

1. Overview

At 10 a.m. on May 20, Bitcoin experienced its first difficulty adjustment after the halving. The difficulty of this adjustment dropped by 6%, which was the 16th largest adjustment in the history of Bitcoin mining.

Data from BTC.com shows that as of 10:00 on May 24, the computing power of the entire Bitcoin network was approximately 91.87
EH/s, mining difficulty is 15.14T. It is estimated that there are still 12 days and 9 hours left before the adjustment, and the next mining difficulty will continue to decrease by 11.27% to 13.43 T.

Ranking of the top 20 difficulty decreases in the entire network, source: BTC.com, TokenInsight

2. After the halving, the computing power of the entire Bitcoin network dropped significantly.

TokenInsight believes that currently it is not possible to directly observe the computing power of the entire network, but it can be calculated from the average block generation time and difficulty changes. According to the analysis of the average block time, the computing power of the entire Bitcoin network has experienced a significant decline after the halving.

Bitcoin average block time, source: ByteTree, TokenInsight

The average block generation time for 1,000 blocks (about a week) before the halving was 560 seconds, and for the 1,000 blocks after the halving was 689 seconds, a year-on-year increase of about 20%, indicating that the computing power of the entire network dropped by approximately 20% during this period. .

Average block time every 200 blocks, source: ByteTree, TokenInsight

Since the difficulty adjustment, the average block time to date is approximately 706 seconds. This shows that the Bitcoin network is still balancing itself and clearing out inefficient miners.

3. After the halving, transaction fees increased significantly, and the proportion of fees increased from 4% to 15%.

Data shows that in the 2,000 blocks before and after the Bitcoin halving, the number of transactions on the chain was relatively stable; at the same time, the average handling fee after the halving increased slightly compared with before the halving.

Number of transactions on the Bitcoin chain, source: ByteTree, TokenInsight

Average handling fee per 50 transactions, source: ByteTree, TokenInsight

As shown in the figure below, miners’ mining income decreased after the halving, but transaction fee income increased by 200% at the moment of the halving. With the stable operation of the Bitcoin network after the halving, the average transaction fee ratio of miners has increased from 4% before the halving to about 15%.

Proportion of transaction fees in miners’ total income, source: ByteTree, TokenInsight

Overall, after the halving, the total transaction fees of Bitcoin increased in a volatile manner as TokenInsight had previously expected. The increase in fees indicates that investors are willing to pay a premium for transactions to be prioritized. However, if we hope that Bitcoin will develop healthily according to Satoshi Nakamoto’s vision, that is, the main income of miners will shift from block rewards to transaction fees, there is still a long way to go.

4. In the short term, the computing power of the entire network may further decline, and the flood period will be a follow-up benefit.

Affected by costs, older miners with lower efficiency will fall into a wave of continuous closures. Therefore, the computing power of the entire network is expected to decline further in the short term.

But on the other hand, domestic miners are well prepared for the flood season. In the next few months, cheap electricity during the flood season will show its advantages, and a large number of domestic miners will move to Sichuan from all over the country.

On May 18, the Sichuan Provincial Department of Economy and Information Technology issued the "Notice of the Sichuan Provincial Department of Economic and Information Technology to effectively strengthen power dispatch and operation arrangements to ensure stable power supply in the province." The content of the "Notice" mentioned: 5
The electricity load in Sichuan Province has increased significantly since last month. At the same time, the incoming water in various river basins in the province has been about 20% less than the same period last year, and the hydropower generation capacity has been significantly reduced. State Grid Sichuan Electric Power Company should combine water conditions and load forecasts in each river basin to optimize power dispatch, ensure power supply, and strengthen joint dispatch of reservoirs. Therefore, at present, the flood season that domestic miners have been waiting for will be postponed.

However, TokenInsight predicts that with the official arrival of the subsequent flood season and the delivery of a new batch of high-performance mining machines such as the Antminer S19, the computing power of the entire network may recover.