It is no longer news that blockchain and virtual assets such as cryptocurrencies are changing so many things in our world today. So many people have accumulated tremendous profits by simply owning some crypto, and it doesn't look to be declining anytime soon. Instead, there has been an explosion of platforms offering trading/exchange and storage services to crypto holders and traders.
In the last decade, we have witnessed bitcoin leading the other cryptos in a race for value. As the first virtual coin to be built and deployed on a blockchain, bitcoin is easily the most popular and coveted coin. The enormous expectations that the world has on cryptocurrencies make obtaining them more of a necessity than a pastime.
There are three ways to accumulate cryptocurrencies. Bitcoin, for example, can be earned through mining, bought, or exchanged for other cryptocurrencies. Bitcoin mining is one of the best ways to earn bitcoin today. Unfortunately, bitcoin mining has gone through a journey that is just over a decade, and as expected, it has become increasingly difficult to mine the coin.
In 2010, you could mine dozens of bitcoin within an hour on your desktop PC, but today, it would take tremendous computing power and many days to mine a dozen bitcoins. In addition, Bitcoin mining difficulty increases by the day; recent data from the bitcoin network puts the mining difficulty at 27.97 trillion today. Here is a graph showing how the bitcoin mining difficulty has changed since 2009:
While this might not affect your daily activities in any way, you have to understand the cause, impact/effect, and potentials of the increasing bitcoin mining difficulty if you intend to stack up as many bitcoins as you can before mining ends.
In this article, we'll explain what affects the complexity of mining cryptocurrency and bitcoin, particularly the possibility of staying afloat and not losing potential profit from mining due to an increase in complexity—finally, the methods to remain profitable despite an increase in bitcoin mining methods.
What Affects The Difficulty of Bitcoin Mining
While you might experience some difficulty in purchasing and setting up bitcoin mining equipment, the specific difficulty referred to in this article describes a concept, crypto mining difficulty, that determines the success of bitcoin mining. But to understand that concept, however, we'll briefly revisit a common knowledge that you should know; the algorithm of bitcoin mining.
Crypto Mining: Hashrate and Algorithm
Bitcoin operates a proof-of-work (PoW) mining protocol; the blockchain requires a network of computers to provide enough computational power to verify transactions after solving simple mathematical equations.
The measure of the computational power available to verify those transactions on the blockchain is the hash rate (or hash power). Now, this is where it gets interesting.
When a transaction is verified on the bitcoin blockchain, the algorithm lines up the possible miners (computers) that will "win the bid" to verify it. The selection is not made randomly or cardinally, but the miner with the most proof of doing work (providing hash rate) as at that time has the best chances of verifying the transaction and getting the reward.
Now, because there are numerous miners on the network and the bitcoin code has a fixed reward per block per time, the algorithm must "sieve" the available miners to only give those (with the higher chances of verifying transactions) the higher chances to be selected. This is where the current bitcoin difficulty comes in.
Bitcoin mining difficulty refers to the calculated difficulty in mining new blocks on the bitcoin blockchain. The mining algorithm measures the total hash rate needed to mine the next bitcoin. The value, therefore, changes according to the mining conditions; if the conditions are favorable, the mining difficulty reduces, and if the conditions are more challenging, the difficulty increases.
Now, let's go back to those factors affecting the bitcoin mining difficulty. There are five:
Available Mining Power (hash rate)
Once the algorithm calculates the hash power needed to mine the next bitcoin or any other crypto block, it compares the value with the available hash power on the blockchain network. The algorithm adjusts if the available hash power is not enough or more than the calculated rate. The higher the available mining power or the more available miners, the greater the competition between miners to verify the next block and vice-versa.
Timing for Block Generation
Bitcoin completes a block about every ten minutes. Still, in reality, some blocks may be ready for verification before the ten minutes elapses. Therefore, to keep a constant block verification process and thus to the mint of new bitcoins (for rewards), the algorithm must adjust the mining difficulty to ensure each block is mined every ten minutes.
The increase in the number of miners increases the mining difficulty. But the efficiency of the mining equipment is also essential; this is why miners use the latest and most-efficient mining equipment as the mining difficulty increases. But since only a fixed amount of bitcoin can be earned during a fixed time, using the same mining equipment for a long time can prove counterproductive by reducing the profits over time.
Available Mining Rewards and Increasing Miners
According to Satoshi Nakamoto's code, the initial mining reward was 50 BTC per block. But that has drastically reduced to the current 6.25 BTC per block. The table below shows the history of bitcoin halving.
|Halving||BTC launched||Halving 1||Halving 2||Halving 3||Halving 4||Halving 5||Halving 6|
|Date||3 January 2009||28 November 2012||9 July 2016||May 2020||2024||2028||2032|
The following image shows the all-time bitcoin mining hash rate. Notice that the hash rate (and therefore miners) has increased steadily over the last thirteen years.
Finally, we have arrived at the most critical aspect affecting bitcoin mining's difficulty and profitability. As seen in the table, the reward for mining bitcoin is getting smaller, yet the number of miners is steadily increasing according to the hash rate chart above. The greater the number of miners that share mining rewards, the lower the amount of BTC they can receive for mining.
In turn, the number of miners is affected by several factors such as government policies, high energy consumption leading to power outages or high energy costs, and the current price or exchange rate of bitcoin. Miners will consider these factors and proceed if they determine that the bitcoin difficulty level can help them profit from bitcoin mining. The critical question is: is it possible to offset or counteract the bitcoin mining difficulty?
How to Offset the Increase In Bitcoin Mining Difficulty
Yes, it is possible to offset the crypto mining difficulty on any blockchain. There are two different but effective methods of doing this:
Increasing Your Mining Power
Although the bitcoin mining algorithm favors the miners with higher computing power (hash rate), it doesn't mean that miners have to do physical work before they get rated; instead, the algorithm prioritizes miners according to their mining power.
You can increase your mining power to offset the bitcoin mining difficulty. Since mining requires specialized equipment and software, every miner must level out the changes by using the latest equipment as manufacturers regularly update bitcoin mining equipment as a matter of priority. An ASIC miner made in 2016, for example, might be less-effective at mining bitcoin today.
To increase computing power, miners purchase numerous units of bitcoin mining equipment and use them simultaneously. The idea is not just to provide more computing power for surmounting the difficulty in mining bitcoin but also to increase the mining pace. It is a game of numbers and statistics; the greater the number, the greater the chances of verifying bitcoin blocks and receiving rewards. Therefore, increasing the computing power is the easiest and cheapest way to counteract the bitcoin mining difficulty.
There are several ways of mining bitcoin; individual mining, joining mining pools, and hosted mining are popular methods. The major difference is the effectiveness of these methods and how they are ranked in their probability of being profitable.
Human Factor and Market Condition
The second method of counteracting bitcoin mining difficulty is random and not deliberate as the first method of increasing computing power. As mentioned earlier, bitcoin difficulty adjustment happens automatically if the mining conditions such as available hash power changes. For example, suppose, for any reason, the number of miners available at a given time reduces. In that case, the available miners have more sharing mining rewards and have more chances of verifying blocks.
But the challenge is that these factors that can impact the number of miners on a network are random and mostly not deliberate. They are broadly classified as human factors and market conditions.
The reception of cryptocurrencies has been mixed and varied; it has ranged from acceptance to nonchalance and outright dislike. Some countries have embraced the new technology; others have rejected and criminalized it. Now, legislative decisions can severely impact the availability of mining power.
In June and October 2021, China outlawed cryptocurrency mining and transactions, respectively, the total mining power available on the network dropped. As a result, China fell from the number one mining spot as China-based miners exited.
Others increased the electricity tariff, forcing smaller miners to either shut down or find alternative energy.
These human factors can considerably lower the mining power and give the available miners a better chance to counteract the difficulty in mining bitcoin.
Volatility is a significant characteristic of cryptocurrencies. A sudden drop in the market value of bitcoin may prompt smaller miners to pause mining as they would incur costs without earning rewards. It is a cause-effect situation; the market condition can impact the available mining power. Another factor is what is often referred to as the "peak period" in crypto trading. The peak period is the trading period that sees the most transactions on a blockchain. Smaller miners tend to pause mining when there is less activity on the market.
Bitcoin has pumped in price many times since it was created. But it has also experienced huge crashes that have sent investors panicking. Yet, for those who believe in the future, bitcoin mining remains a way for them to earn bitcoin cheap and easy. When the price of bitcoin is low and the market is uncertain, it is perhaps the best time to enter bitcoin mining and position to earn rewards.
But what is the best way to mine bitcoins and other cryptos to offset the crypto mining difficulty?
How Minery Can Help to Offset the Increase In Bitcoin Mining Difficulty
In the last section, you saw that it is possible to improve your chances of making profits via bitcoin mining by adjusting the mining difficulty. For example, it is possible to lower the cost of a mined coin, thereby lowering more blocks at the exact cost. In this way, you can, over a long period, overcome the crypto mining difficulty and make profits.
This is much better than purchasing single units of the latest mining equipment and hoping that the random factor affecting crypto mining difficulty will somehow converge to make the mining difficulty favorable to you.
Remember, the goal is to increase your mining power to offset the mining difficulty while keeping costs minimum to ensure that you stay in profit.
Perhaps the best way to do this is by engaging our Minery-hosted mining service. Minery is focused on helping crypto miners to stay profitable using a mining method that offers the best chance of counteracting the bitcoin hash rate difficulty. In addition, using Minery hosted service to mine bitcoin is easily the easiest and cheapest way to acquire bitcoin.
How Does Minery Hosted Mining Work?
Hosted mining is a method that makes mining easier, cheaper, and potentially profitable. You can purchase or lease bitcoin mining equipment in a secure data center with hosted mining. This is where are we at Minery provide an excellent service for our clients. Our data center, located in Siberia, offers you a way to easily overcome the difficulty of mining bitcoin and other cryptocurrencies and begin your journey towards making profits.
Why is Minery’s hosted mining the better choice for you?
- First, we understand the need to make bitcoin mining efficient. That is why we purchase the latest ASIC mining equipment from the manufacturers at discounted prices, effectively lowering the total mining costs. The ASIC miners are unarguably the leading crypto Mining equipment today. We have over 15,000 servers serving customers around the world.
- Our data center is located in Siberia, where the low temperature saves money that would otherwise be spent on cooling systems. Siberia's low energy tariffs, a benefit of the country's hydroelectric power system, further reduce the total mining costs.
- Our hosted mining fees cover the simultaneous use of several mining equipments. That is why you can mine more blocks of cryptocurrencies for the same price without purchasing more.
- Minery's hosted mining gives you the best method to make profits despite the increased bitcoin mining difficulty over a long period. With similar investments in this mining method, you can stay profitable.
- Finally, we use enterprise software to manage each customer's dashboard.
Benefits of Minery Hosted Mining
When you choose Minery; you say yes to the following:
- An efficient mining service delivered through a customer-first approach. Our mining service is here to serve you and make your bitcoin mining journey a rewarding experience.
- A team of qualified engineers and technicians is always on hand to perform preventive maintenance on all equipment. We take the stress off your mind and body.
- Continuous monitoring of mining equipment and automatic outage detection. We also have an insurance and buyback policy for our customers.
- 24/7 customer support and personalized service. Support is delivered via email and phone. You get a real-time view of your miners' performance and transparent daily billing and reports.
- Low initial capital to begin crypto mining.
With Minery Bitcoin mining hosting service, you can be in an excellent position for the bitcoin mining difficulty adjustment and increase the potential to stay profitable despite the increasing difficulty in mining bitcoin.