The bitcoin mining difficulty – a measure of the ease with which miners can find a block of bitcoin – is likely to exceed 50T on Wednesday, marking a new all-time high, and it could rise even more.
The surge in bitcoin values this year, as well as the growing recognition of the Ordinals protocol, has resulted in improved profitability for miners, and miners are continuing to install more mining machines as anticipated.
These variables contribute to increased computational power, which leads to higher levels of difficulty.
In order to maintain the time needed to mine a block steady at around 10 minutes, the Bitcoin mining difficulty increases automatically when more computer power, or hash rate, is added to the network.
“As rack space becomes available, new-generation machines will continue to be plugged in,” said Ethan Vera, chief operating officer at mining services business Luxor Technologies.
According to Vera, the ordinals protocol’s rising popularity has led to transaction costs that are three times higher than usual, boosting miners’ revenue.
Ordinals provide extra features on the Bitcoin blockchain, such as non-fungible tokens and other currency, which increases the number of transactions and hence the profitability of mining a block.
As the difficulty increases, miners’ profitability decreases since their odds of winning a single block and generating income decrease.
Marathon Digital Holdings (MARA), one of the major mining companies, disclosed a month-over-month decrease in their mined bitcoin for April due to increased difficulty, likewise, Canadian miner Bitfarms (BITF) lost money in the fourth quarter due to increased difficulty.
However, a few circumstances could slow the hashrate’s rise. According to Tim Rainey, Treasurer at Greenidge Generation Holdings (GREE), some of those factors could include a lack of strong bitcoin price fluctuations and limits in existing infrastructure.
According to Charles Chong, senior manager of business development at Foundry, unknowns about the upcoming Bitcoin halving event could also delay the increase in mining difficulty.
Digital Currency Group, CoinDesk’s parent firm, owns Foundry. In the meantime, having too much hash rate in one place may have an impact on the rise of Bitcoin mining difficulty by changing how mining rigs are set up.
“Given the concentration of hash rate in North America, we are seeing new seasonal trends,” said Colin Harper, Luxor Technologies’ head of content and research. Previously, during China’s rainy season, when inexpensive hydropower was available, the hash rate would rise.
Rather, when summer heat waves hit the United States, miners turn off their machinery to save the energy needed for cooling.
Don’t miss important articles during the week. Subscribe to blockbuild weekly digest for updates.