A new milestone is on the horizon for Bitcoin mining as its difficulty level is set to surpass 50T on Wednesday, marking a record all-time high. This comes as a result of factors such as the rally in Bitcoin’s price and the surge in popularity of the Ordinals protocol. As the mining community continues to be more profitable, it may also stimulate growth within the bitcoin network.
The profitability of bitcoin miners has been positively impacted by not only the bitcoin price rally this year but also the rising fascination towards the Ordinals protocol. Miners are deploying more mining machines as planned, contributing to an increase in the network’s computing power, consequently raising the difficulty levels. Mining difficulty adjusts automatically in response to the added hashrate to help stabilize block mining times to around 10 minutes.
Newer-generation mining machines are continuously being connected, which may have a knock-on effect with the available rack space. This can be a potential issue as expressed by Ethan Vera, Chief Operating Officer at Luxor Technologies. On the flip side, the growing popularity of the Ordinals protocol has transpired into transaction fees tripling, resulting in a boost to miners’ revenue. The protocol lends itself to extensions in functionality for the Bitcoin blockchain, such as non-fungible tokens, and has promoted an increase in the number of transactions, making block mining more profitable for miners involved.
The increasing difficulty in mining carries a negative effect on miner profitability, reducing the chance for miners to win a single block and generate revenue. This trend has been observed by some of the largest miners, such as Marathon Digital Holdings and Canadian miner Bitfarms. Despite this, certain circumstances could potentially impede the growth of hashrate, such as stagnation in Bitcoin’s price movement or constraints in infrastructure availability. Uncertainty around future Bitcoin halving events could also impact the rise of mining difficulty, as mentioned by Charles Chong, Senior Manager of Business Development at Foundry.
Moreover, geographical concentration of hashrate could play a part in affecting the growth of the Bitcoin mining difficulty. Colin Harper, Head of Content and Research at Luxor Technologies, suggests that the prevalence of hashrate in North America has led to “new seasonal trends.” Historically, the hashrate would spike during China’s rainy season due to cheaper hydropower availability. Now, it is influenced by U.S. summer heatwaves that force miners to power off their equipment in an effort to reduce energy consumed for cooling.
As the mining difficulty level approaches its historic 50T mark, it triggers a range of outcomes within the Bitcoin mining community. A combination of positive and negative consequences emerges, driven by factors such as rising profitability, popularity in the Ordinals protocol, and geographical distribution of mining hashrate.
Source: Coindesk
