Bitcoin difficulty saw an increase of 4.68, marking the second-largest adjustment in difficulty level in over a year and reaching a new all-time high.
The adjustment further secures the Bitcoin network, making attempts to attack the network more energy intensive.
A New All-Time High
The Bitcoin blockchain’s difficulty saw a considerable increase, rising by 4.68% and reaching a new all-time high, marking the second-largest positive adjustment in over a year. The blockchain’s difficulty is based on the mining activity on the network and is set automatically.
A higher difficulty indicates a more secure blockchain because it makes it significantly harder and more energy-intensive for any malicious actor to attack the network. Furthermore, it also becomes more difficult to mine new blocks because of the increased difficulty.
A More Secure Network And Consistent Block Times
The difficulty automatically adjusts relative to the miners’ hashrate, keeping the time to create a new block consistent at 10 minutes. As a result, the difficulty would continue to increase along with the hash rate should the network come under attack by any malicious entity or new miners. Because the difficulty adjusts every 2016 blocks, which means any malicious miners would have just two weeks before the network would adapt to reduce their control on it.
Increased difficulty indicates consistent block times thanks to increased competition among miners. However, there is also a downside, as increased difficulty puts considerable stress on mining as it requires more computing power to earn rewards. As a result, the ROI on mining hardware goes down.
Bitcoin Becoming More Centralized
Bitcoin’s hashrate is also becoming increasingly centralized, with a few mining pools controlling most of the hashrate. Data from Mempool has shown that over 50% of the total hashrate is held by Antpool and Foundry USA. Foundry has maintained a hashrate of over 30% for several weeks. It also became the first non-Chinese origin mining pool to lead Mempool’s list in 2021, thanks to the ban on Bitcoin mining in China.
At the time, Foundry USA held 17% of the total Bitcoin hashrate, with its share increasing to an average of 34.1% of the mining power. Behind Foundry USA comes Antpool with around 18% of the total hashrate. Antpool was the largest Bitcoin mining pool but was severely impacted by the Chinese ban on crypto mining.
What’s Behind The Centralization?
Today, five pools dominate the Bitcoin mining landscape. Several factors have contributed to this, such as the location of the servers of the pools in question. The closer the servers, the lower the latency when it comes to the transfer of information. Miners stand a chance of earning more BTC if they connect to servers closer to their location. Another important factor is the financial incentives offered by the mining pools.
Larger pools are able to offer more profits to their members, leading to more miners joining the ecosystem. The dominance of these larger pools makes it more difficult for smaller mining pools to turn a profit.
A Risky Development?
The increased centralization of Bitcoin’s mining system does pose some risks, such as a 51% attack. 51% attacks have occurred on other Proof-of-Work blockchains such as Ethereum Classic. Furthermore, large mining pools could also face scrutiny from regulatory agencies as Bitcoin, and the larger crypto ecosystem comes under increased regulatory scrutiny.
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Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.