May 19, 2020

Bitcoin Hash Rate Continues To Slide Down: Mining Profitability Is At Stake

The third in the history of Bitcoin halving gathered around itself a lot of polar predictions and warnings from many crypto enthusiasts. Although after more than a week has passed, we can already see some signals and changes in the development of the Bitcoin network.

This halving occurred in a truly unique macroeconomic environment, while the first and second halving fueled a huge panic and misunderstanding around what would happen to the cryptocurrency market. This was told by Tuur Demeester, one of the long-time adherents of Bitcoin. In particular, in an interview he outlined the problems that the crypto community faced during the first and second reduction in Bitcoin mining rewards.

The first halving, which took place in 2012, was shrouded in great uncertainty. Many analysts admitted that the network could not stand this event and “put an end to” the future protocol.

Also, among cryptanalysts, the concept of comparing the consequences of the first halving with the “Y2K” error received great support. The “Y2K” or “Problem 2000” problem arose because of the high probability of incorrect data transfer from software developed in late 1999 and 2000 generation software. This was due to the lack of a unified system of naming dates of time.

Demeester noted:

“During the first halving, we were all worried that the Bitcoin network might repeat the “Y2K” error. It felt very much like a panic at the beginning of 2000, when there was a transition of software from one millennium to another. ”

Will the miners fall into the debt spiral trap?

Each new halving is accompanied by the occurrence of a mining debt spiral problem. This situation is associated with a reduction in the hash rate with a rather high level of cryptocurrency mining complexity, as a result of which the generation of a new block slows down. The debt spiral reduces the income of miners if they cannot adapt to new working conditions.

After the third halving, which took place on May 11, the Bitcoin hash rate continues to decline. Today, this indicator is 109.46 million TH/s.

Despite this, Demeester is confident that the third halving is not threatened by the debt spiral problem. He noted:

“We are not affected by the debt spiral problem. Even if all miners turn off the equipment, after 2 weeks the hashing speed will be restored ”

The numbers are very indicative in this case: if on May 11, 2020 miners received income in the amount of $171.168 million, now income has fallen to $7,112 million. That is why now the crypto community is faced with the task of developing a new “incentive system for increasing profit for miners”.

Disclaimer

This article is intended as a news item to inform our readers of various events and developments that affect, or that might in the future affect, the value of the cryptocurrency described above. The information contained herein is not intended to provide, and it does not provide, sufficient information to form the basis for an investment decision, and you should not rely on this information for that purpose.

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