Even though the price of Bitcoin has been very up and down this year, swinging a full $10,000 from its $3,000 lows to its $13,000 highs, it’s mining difficulty has been on a pretty steady climb through the whole of 2019 to date. This is rather unusual as there has barely been a drop in difficulty for over ten months.
This sort of consistency in its climb is worth noting, and understandable at the same time. Bitcoin is heading towards an important mark in its growth – the predicted 2020 halving of its mining rewards. That is to say that in about May of next year, miners will only receive half the amount of Bitcoin for unlocking a block.
This is to maintain its scarcity, and fight inflation, but it has also caused the mining community to go into overdrive. Bitcoin’s mining difficulty is directly correlated to the amount of hashing power that is going into it – the more power, the harder the algorithm. Thus, it is clear that miners are working overtime to get as much BTC as they can before it gets chopped in half.
To date, BTC mining difficulty has dropped five times this calendar year, but never by more than a measly 1.18 percent. That’s unprecedented. No previous year has seen its biggest drop be that low. Most years see at least one drop of over 5 percent.
It is also unusual to see this kind of mining effort as it suggests that the mining community is less sensitive and effect by the price swings. Bitcoin’s mining profitability rests on the price of the coin, and it is understandable that mining power will drop when it becomes less profitable, but this has not really happened this year.
Part of the way Bitcoin is designed is that there needs blocks to be generated at a predictable rate, the difficulty of this thus needs to change depending on how many miners are involved. If a lot of miners leave all at once, for example, the mining difficulty has to be reduced, or the remaining miners wouldn’t have the power needed to generate new blocks at the rate needed to keep the network running.
The halvening must surely be playing its part in the steady climb of hashing difficulty. However, it is also a positive sign in general. The fact that the mining ecosystem is so healthy and competitive is usually seen as positive for a blockchain. More so, the fact that the price is less of a factor also indicates there are other incentives to secure the network with hashing power.