Bitcoin Faces The Largest Ever Negative Difficulty Adjustment
Bitcoin’s network will see the largest negative difficulty adjustment ever, of more than 27% today. Retargeting from 19.9T up to 14.4T is possible. Retargeting will occur in 50 blocks, starting at the time of this writing.
“Difficulty” is a metric that describes how difficult it is to mine new blocks. Miners need to have an average of 3.5 GHz to mine the next block hash. The more difficult the network is, the higher its difficulty. Bitcoin’s difficulty and price fluctuate and miners become more and less profitable. They then turn on and off hardware to create a kind of homeostasis.
Based on how long it took to mine previous 2016 blocks, Bitcoin’s difficulty adjusts for every 2016 block. The 2016 blocks should be mined in 10 minutes. However, as more hash power is added to or subtracted from Bitcoin’s network, block mining times may become shorter or longer temporarily.
Block mining times have been steadily increasing over the current difficulty period, which indicates the significant difficulty adjustment yet to come.
Due to the recent exodus Chinese miners after government crackdowns on the industry, miners have been closing down hardware and moving operations to other locations. The influx of new machines is rapidly moving into Kazakhstan, El Salvador and Texas (and other locations that are more friendly to miners) around the world.
Although there is a short term drop in Bitcoin hashrate, large-scale migration and dispersion mining equipment will add security and decentralization in the long-term, as others have pointed out.
The long-term implications of mining decentralization are not the only ones. The difficulty readjustment will merely decrease block times, making transactions confirm significantly faster. It will also increase profitability for miners, which will further pressure those who leave China to deploy their equipment.