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Bitcoin difficulty adjustment analysis after halving 2020

May 25, 2020

The third halving of Bitcoin (BTC) has passed, and the Bitcoin network has just undergone its first adjustment in difficulty after reducing the third block reward. The difficulty has decreased from 16.1 trillion to 15.14 trillion, a reduction of approximately 6%, which provides some relief to miners who have survived.

The hash rate in the Bitcoin network recorded a significant decline after halving

It is important to recognize that the network hashrate cannot be estimated directly. Rather, it should be calculated from the average production time of the block and the level of difficulty. Based on the analysis of the generation time of a block, the Bitcoin network has experienced a significant decrease after halving, with the average generation time of a block in the last 1,000 blocks before halving being 560 seconds, falling to 689 seconds per 1,000 blocks after halving , which corresponds to an increase of approximately 20% in the average generation time of a block, indicating that 20% of the network hash rate has gradually disappeared over the period.

Bitcoin difficulty adjustment analysis after halving 2020Bitcoin difficulty adjustment analysis after halving 2020

From the first adjustment of the level of difficulty after halving began in 2020, the average generation time of a block is now around 706 seconds, indicating that the network is still trying to re-establish itself and squeeze inefficient miners.

Related: A Closer Look At Bitcoin’s Hash Rate After Halving

Average mining income per 1,000 blocks saw a 15% increase in commissions compared to 4% before halving. Commission miners’ incomes rose 200% immediately after halving the block reward and slowly rose to their current high due to the surge to a higher level of almost 30% average transaction fees. The average number of transactions per block has remained relatively stable.

Network operators are now paying higher fees to compensate for the slower block production time after halving. It will still take some time to stabilize miners’ incomes to reflect the healthy growth of the Bitcoin network.

Hashrate could be reduced further, but is expected to increase in the medium term due to the rainy season in China.

The average generation time of a current block after the first adjustment of the difficulty in halving Bitcoin a third time remains consistently longer than the estimated time of 600 seconds for generating a block. News has been circulating in the Chinese media that delays in the rainy season have caused the river to drop by about 20% and electricity demand is expected to be higher in the height of summer.

The rainy season is expected to offer miners in China the opportunity to benefit from cheaper electricity prices, as heavy rains lead to lower hydropower prices.

Miners in the Chinese province of Sichuan are expected to use this to increase the network hash rate at the beginning of the rainy season, along with delivering next-generation ASIC miners such as Antminer S19 to customers. .

In the short term, the network will continue to see a gradual withdrawal of miners, particularly those of previous generation machines or miners with significantly higher costs. Miners started to prepare for the rainy season in China before Bitcoin halved, and miners from other regions are expected to flock to the Sichuan region to benefit from lower electricity costs in the coming months.

The views, thoughts and opinions expressed here are only those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Johnson Xu He is a dedicated financial technology professional with a background in finance and information technology and has extensive experience in the crypto / blockchain industry. He is currently leading research initiatives and is chief analyst at TokenInsight, a company that offers investment research, ratings, data analysis, industry insights, investment management services, industry advice, etc. His previous experience includes a world-class global cryptocurrency exchange and consultancy, Fortune 200.