After 18 months of continuous uptrend in the Bitcoin network’s hashrates, June saw a decline. While several theories emerge about the cause of the phenomenon, it looks like miners with older ASIC systems (specialized mining rigs) are disconnecting from the network because it is no longer profitable. Thus, the reduction in the total hashrate of the network.
Bitcoin’s hashrate, which has currently dropped to 600 exahashes, is the processing power miners need to solve a cryptographic puzzle to build the next block on the network. More miners joining the network leads to an increase in its hashrate. The opposite also applies, explaining how miners leaving has led to the drop in Bitcoin’s hashrate after 18 long months.
Hashrate in the hundreds of exahashes require immense energy that mining equipment consume to earn mining rewards. Those with old-generation ASICs are no longer finding it profitable to mine after April’s Bitcoin halving. Their rewards were essentially slashed in half.
Compared to competitors with newer mining rigs, the miners disconnecting from the network expend way more electrical energy because of older technology. So, the latest halving has reduced any profits they can see from each block, thus removing the incentives for them to participate with their existing rigs.
An X post by Hashrate Index describes it technically, “S19 XP & M50S++ will operate at a loss if the hash cost rises >$0.09/kWh. >$0.08/kWh k Pros & M50S+ will be unprofitable. And at $0.06-$0.07/kWh the S19j Pro+, j Pros, and M30S++ will struggle.” All miners using ASIC models like S19 XP and M50S++ have begun disconnecting since it makes no monetary sense to mine.
However, the drop in Bitcoin’s hashrate is temporary. These miners will return with new mining equipment, and the attractive price rises of bitcoin will draw new miners, too, increasing the number of miners in the Bitcoin community and pushing the hashrate up.
CoinShares predicted this slump in April and asserts the hashrate will rise again in 2025. “Our model forecasts the hash rate rising to 700 exahash by 2025, although after the halving, it could fall by up to 10% as miners turn off unprofitable ASICs.”
A theory making its rounds, stating that the dropping hashrate is due to miners massively selling their rewards, cannot be real since bitcoin movement from them to exchanges is not large enough to affect the network’s hashrate.
Image by Pete Linforth from Pixabay
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