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Bitcoin Mining Difficulty Decline Favors Persistent Miners

Bitcoin’s blockchain technology is starting to favor small miners through decreased mining difficulty.

Bitcoin mining difficulty is falling thanks to the digital coin’s underlying blockchain technology. If trends persist, small miners should be able to take advantage of this latest development.

Right now, the bitcoin market is going through trying times after the unprecedented price decline that occurred in November. It saw bitcoin drop in value and breach the $3,500 mark. This fall was an over 80 percent reduction from its all-time high of $19,650 within 12 months. The situation has had miners in limbo as many try to mull over the next course of action while profits dwindle.

According to figures released by Autonomous Research LLP. Fundstrat Global Advisors LLC, over 100,000 individual miners have ceased operations. Additional estimates indicate that approximately 1.4 million mining servers have been shut down since September. F2pool, a leading China-based mining pool, reportedly saw over 600,000 miners close operations in November.

Persistent Crypto Mining Companies Maintain Profitability Amid Declining Difficulty

Some of the resolute crypto mining companies that continue to operate under current conditions continue to enjoy impressive profits. One such entity is Salcido Enterprises, a Washington-based firm that manages low-cost electricity and fiber optic connectivity facilities. With access to cheap power, the company apparently pays just about 3 cents per kilowatt-hour. The rates have allowed the company to realize groundbreaking profits.

The firm, which claims to operate one of the largest ASIC centers in North America, apparently has access to 22 megawatts of power. It’s also working on another facility that is set to provide an additional 20 megawatts.

Speaking to Bloomberg, its head, Malachi Salcido, revealed that his company saw profits tumble to just 20 percent almost overnight in the wake of the recent market slump. However, margins rebounded to 40 percent after bitcoin miners started to leave the sector.

Their withdrawal caused the Bitcoin network to downgrade mining difficulty. The blockchain technology that underlies Bitcoin lowers the mining difficulty as the hashrate drops. The inverse is true and leads to an increase in energy costs. Changes in mining difficulty are triggered every 2016 blocks.

According to data obtained from Blockchain, the network hashrate has fallen by over 40 percent since reaching a peak in August. At the same time, mining difficulty has descended by 15.1 percent within the same period.

According to Salcido, few mining outfits will survive the current onslaught. However, Bitcoin miners who choose to weather the current market situation are set to benefit from lower mining costs.

Better Times for Small Miners

Bitcoin mining equipment manufacturers are beginning to feel the pinch after the market decline as demand for miners wanes. A few days ago, crypto mining hardware manufacturer Canaan Creative held a flash sale in which its Avalon 921 and Avalon 851 were priced at $200. The event was apparently held in celebration of the bitcoin price hike that occurred on November 28.

According to Steven Mosher, a company representative who spoke to Coindesk, the flash sale was also launched to help mining farms stay committed during these turbulent times.

There are also unconfirmed reports that crypto mining rigs are being sold by the pound in China because of declining demand. Many enthusiasts in the region apparently view crypto mining as unprofitable at this stage.

That said, falling mining difficulty and access to cheap hardware means small-scale miners should be able to re-enter the market in the near future if conditions persist.

(Image Credit: Yahoo)

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ABOUT THE AUTHOR

Getting Started Gold Bars.

ABOUT THE AUTHOR

Elizabeth Gail is crypto-enthusiast and a blogger. Her specialties include cryptocurrency news and analysis. When not writing about crypto, she’s out taking part in humanitarian endeavors across the world. You can reach out and engage with her on Twitter and Google Plus.