Declining Price/Upward Hash Rate
The price of Bitcoin is not looking good, with most long-term analysts not pointing towards any trend reversal in 2019 or 2020.
2016 and 2017 gave investors the dream scenario, and a cool-down period is to be expected price-wise, but if we remove the speculative price, the underlying economy and adoption of Bitcoin’s network are in their own bull market!
Earlier this year, we looked at the Bitcoin hash rate, which was around 30,000 PH/s at the time. As of this writing, that has exploded to over 50,000 PH/s (50,000,000 TH/s). With almost double the power since April 2018, the increase shows underlying growth and development in the Bitcoin ecosystem.
The more hashes your machine can process, the more likely you are to get a reward when mining. This is what makes cryptocurrency mining so competitive, as everyone is trying to find the correct hash (an alphanumeric string) to earn the mining reward!
1 KH/s is 1,000 (one thousand) hashes per second.
1 MH/s is 1,000,000 (one million) hashes per second.
1 GH/s is 1,000,000,000 (one billion) hashes per second.
1 TH/s is 1,000,000,000,000 (one trillion) hashes per second.
1 PH/s is 1,000,000,000,000,000 (one quadrillion) hashes per second.
1 EH/s is 1,000,000,000,000,000,000 (one quintillion) hashes per second.
1 ZH/s is 1,000,000,000,000,000,000,000 (one sextillion) hashes per second.
Mining cryptocurrencies that run on the Proof-of-Work algorithm highlights tangible use cases. Miners have to invest large amounts of capital into specialized equipment to stay ahead of rivals, money and skill are required to create the technology, and the electricity needed to mine coins such as Bitcoin is a constant expense miners face.
Higher levels of hashing power also ensure transactions are processed in a reliable manner. In time, it prevents or limits the ability for bad actors to compromise the blockchain with 51% attacks or double-spending, something we’ve covered in the past.
Is Bitcoin Mining Becoming More Decentralized?
One of the biggest weaknesses of Bitcoin and similar coins is ironically the success of large miners generating the bulk of the network’s overall hash rate, potentially giving them considerable control over the respective blockchain.
Since April, the biggest miner on the chart for Bitcoin has lost 10% of its dominance. The overall distribution looks similar, but it’s now a slightly more level playing field.
Smaller mining pools have grown and taken up larger portions of the mining ecosystem. This is ultimately good news for Bitcoin and other minable cryptocurrencies, as diversity and competition mean that one mining pool cannot compromise or influence the network if they ever try!
Rival Cryptocurrencies’ Hash Hate Dropping Against Superpower Bitcoin
During April, popular altcoins Litecoin and Ethereum both had a hash rate of a respectable 200–250 TH/s. Although LTC touched 350 TH/s in early July 2018, it has since returned to 250 TH/s.
Ethereum, however, has not performed as well as LTC. Reaching highs of just under 300 TH/s, the smart contract platform is now losing its hash rate as it heads back to 260 TH/s.
Bitcoin Cash is also undergoing a short-term decline in power, but it’s still up from early 2018. Its hash rate currently sits at an impressive 4,000 PH/s, compared to April’s 3000 PH/s, still dwarfing ETH and LTC.
Harder to Mine in Profit and Cost
Just like hashing power, the difficulty to mine Bitcoin is growing at an accelerated rate. Despite the market sentiment towards the price, this has led to a technologically-driven race for the most cost-effective mining equipment and software in the sector.
In addition, the cost to mine/create bitcoins has gone up over time. It varies depending on the country itself and it could be a dominant factor in why Bitcoin has yet to go back below the $3,000- $4,000 region at the time of writing.
Many in the blockchain sector claim mining costs are already break-even with the price. According to a report by Elite Fixtures, the average cost to mine Bitcoin in the U.S.A. is $4,758, while in Venezuela it is just $531!
Based on the data we’ve looked at, Bitcoin’s underlying economy is booming, despite its trade price turning sour. Now many ask how low miners can go when mining at a loss…
Can Bitcoin’s electricity demands be sustained? History will be the judge, but so far, unless a quantum computer breaks everyone’s cryptographic private and public key pair, Bitcoin is showing the smaller cryptocurrencies how to retain truly tangible value during a bear market!
Disclaimer: This is not investment advice. Nothing is guaranteed, and the blockchain and digital asset sectors are incredibly volatile. Please conduct your own in-depth research.