Hashrate back to peak

During the Bitcoin Halving on May 11, the block reward that bitcoin miners receive for mining the next block in the blockchain was halved. Shortly afterwards, the hashrate of the bitcoin network dropped by about a third, but that has since fully recovered. Right now, the hashrate is about as high as the pre-halving high.

As part of Bitcoin’s monetary policy, the block reward that bitcoin miners receive for mining new blocks is halved every four years: the so-called Bitcoin Halvings. As a result, monetary inflation in the bitcoin economy decreases, but for the miners it is a bit of a swallow at first. Because of the halving, they see the amount of bitcoins they can mine decrease by about half, while they have to use the same amount of power.

Bitcoin halvings can therefore ensure that some bitcoin miners are no longer profitable after the halvings and are forced to turn off their mining equipment. In that case, the collective computing power of the miners decreases, usually expressed as the hashrate . This process works as a kind of self-cleaning mechanism, leaving only the most efficient miners.

Shortly after the most recent Bitcoin Halving on May 11, we saw the hashrate fall sharply. Before the halving it was still at a peak, but after that the network lost about a third of the total available computing power in a short time.

The Bitcoin hash rate. Source: Bitinfocharts

That drop has now been fully recovered and the hashrate is again about the same as before the Bitcoin Halving. Depending on how you measure it can also be slightly higher. The network is therefore protected by approximately the same amount of computing power as before.

Congestion

The rapid drop in the hashrate temporarily caused some congestion on the network. If there is less computing power available for mining, it also takes a little longer on average to find the next block. The transaction speed then decreases. In addition, a limited number of transactions can fit in a block and when fewer blocks are found each day, the daily transaction capacity also decreases .

That also happened right after the most recent Bitcoin Halving. The size of the mempool, a kind of queue for transactions, increased as a result, which led to higher average transaction costs on the network through market forces.

The average transaction cost. Source: Bitinfocharts

However, those problems were temporary, as after 2016 blocks, the built-in Difficulty Adjustment Mechanism automatically adjusted the mining difficulty to restore the 10-minute block time . There has been no congestion for some time now and transaction costs have also returned to their old level for some time now.

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