Bitcoin mining hit a rough patch earlier this year, after multiple of China’s provinces cracked down on it, causing their miners to stop their work and flee the country. However, the recent on-chain data reveals that the situation is changing rapidly, as the Bitcoin mining hashrate has tripled over the last two months of summer 2021.
What this means is that the mining difficulty can soon be expected to rise. In fact, CryptoQuant’s recent post indicates that the surge in difficulty might be as high as 12%. The blog post brings encouraging news, stating that the hashrate is rapidly recovering, with the new metric’s value being at around 152B GH/s.
The importance of high hashrate
Bitcoin is the first and biggest cryptocurrency to still use the Proof-of-Work consensus algorithm for processing transactions. This is actually not a good thing for the project, as mining requires massive amounts of computing power and electricity. As for the hashrate, it represents just how much of this computing power is present within the Bitcoin network at any given time.
This is also commonly used as an indicator of how strong and secure the Bitcoin network is. As a decentralized network, Bitcoin’s blockchain cannot be simply hacked. In fact, in order for any single entity to gain control over it, they would have to hack 51% of all nodes that are running the network. In other words, the more miners there are, the bigger the hashrate, and the bigger the hashrate, the more secure the whole network is.
Earlier this year, in June, the Bitcoin mining hashrate collapsed, dropping to only 52B GH/s as the month came to a close. However, any fears that the drop would continue, fortunately, did not come to fruition, and for the last two months, the hashrate has been on the road of recovery. At the time of writing, it is three times higher than in late June, as mentioned, sitting at 152B GH/s.
China’s crypto mining crackdown and the miners’ alternatives
As mentioned earlier, the biggest contributor to the hashrate crash was China, which conducted crackdown after crackdown on Bitcoin miners and mining facilities. The country has always been famously against regular cryptocurrencies that it cannot control, and Bitcoin, specifically, has been a thorn in its side for over a decade now.
However, due to its cheap electricity — which the country produces on a massive scale thanks to its rain seasons — the majority of Bitcoin miners decided to set up shop in the country that probably dislikes the cryptocurrency the most in the world. So, in retrospect, it was only a matter of time before China cracked down on miners strongly enough to push them out of the country and force country-wide shutdown operations.
And, as a result, the hashrate plummeted. However, the fact that the hashrate is now on the road to recovery indicates that miners may have found a new home(s) in different countries around the world. The US is likely to be one of them, especially after the mayor of Miami, Florida, invited them after the crackdowns, offering them the city’s cheap nuclear power.
Those who did not choose to go to the US have likely found a new home in some other nation, presumably with cheap power and a lack of such a strong anti-Bitcoin attitude. Another thing to note is that the hashrate is likely to skyrocket yet again in the coming weeks, as Iran’s power company recently announced that its ban on mining is going to be lifted in September.
The company was previously forced to ban mining in May due to nationwide blackouts, as the country struggles to produce enough electricity even to cover its basic needs, let alone to feed the ever-growing and always hungry Bitcoin network. But, with the summer at its end, the stress on various other electricity-related needs should weaken, and miners will be allowed to return to their business.