Government banned mining crypto assets on Chinese soil, however 75% of all bitcoins are mined in China. With this, many pools are spreading through all east Asia to relocate themselves and keep working.
However, this isn’t a simple task and some people is experiencing heavy losses as time passes, but this is an opportunity for miners that can keep their rigs online.
What is mining difficulty?
The processes called “mining” are just verifications that need computing power to verify transactions entered on the blockchain.
However, the difficulty associated with the arbitrary math problems that are responsible of adding new blocks, is constantly changed by the system to keep the average time between blocks steady. This improves security of the blockchain network against attacks.
To really comprehend how this work, we need to remember that the mining rigs work by “attempting to solve problems”. These attempts are called hashes and work by processing a batch of transaction through a hash algorithm.
When this happens, an alphanumeric code is generated and its value needs to be lower or equal to a target that is set periodically by the cryptocurrency’s protocol. Depending on the target value the miner must go through less or more attempts in order to get a code that meets the requirements.
This process can be classified as random. To get a single block solved, millions of hashes need to be processed as guesses.
Why bother ramping up the difficulty?
Getting a steady number of blocks can be very difficult when the mining power varies from ASIC farms to single rigs and everyone is competing for a chance to solve the block and get the reward.
In order to accept all that computing power and ensure a steady network, the difficulty rises till an average of a new block every 10 minutes is assured.
Why is it going down then?
As said before the migrations of miners from China and the cease of operations of various miners all over the country, drove the global hash rate down from 180 exahashes per second in May to about 87.7 exahashes per second in June.
This means that the computing power isn’t the same anymore and (for example) Bitcoin transactions would have been longer than 10 minutes to be processed. (Which by some standards it’s a very long time already)
To correct this, the difficulty dropped nearly 28% and analyst expect it to be dropping further or maintain the actual average.
This is great news for miners that can maintain their hashpower online for the next weeks as their profits will rise. Also the recent events will make new bitcoins scarce so price its likely to go slightly up.