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More power and less miners: that's not what decentralization looks like

Miners earn less and less bitcoin, but computing power continues to grow

11.Nov.21 3:55 PM
By Shawn Highstraw
Photo Pinterest


More power and less miners: that's not what decentralization looks like
In mid-May, it was announced that China had introduced a ban on mining bitcoin. As a result, 52% of the network's computing power went offline overnight. By now, almost all computing power is back on the network, albeit in other parts of the world.

On April 23rd, the Bank of China announced the world's first ever cryptocurrency mining ban, which means that the miners will no longer have the option of mining. The cryptocurrency market is growing.

You might remember this case when you came across the Chinese cryptocurrency trading firm ZB, which also worked together with a group of Chinese companies on a project called China Mining Ban (CSB). One of the founders was Huai Jun, cofounder and CEO of ZB Mining Ban, who was accused by various companies of fraud for the past several years.

ZB is an asset management firm based in the city of Zhejiang, and the company is already known for its strong mining software for mining cryptocurrencies, which is capable enough to successfully run multiple altcoins without losing its users over time. The company claims to be the first to officially introduce any cryptocurrency mining ban.

In a separate case, China's central regulator, the People's Bank of China, published a new law last month that is expected to affect those whose investment is made with bitcoin or similar cryptocurrencies. It is expected to make it harder for people to trade Bitcoin.

However, the cryptocurrency world sees its use to gain notoriety as a potential way to make real time money, as well as a way to buy and sell Bitcoin.

Time to dig into the figures, based on the moving average of 7 days, the computing power dropped from 176 EH/s to 84EH/s in the second half of May. This decrease of 92 EH / S was equivalent to the full computing power of the network until October 2019. EH / s specifies the number of cryptographic hashes per second processed for blockchain validation.

Since the low point in early June, computing power has recovered 95% to 164 EH/s analysis company Glassnode expects that given the current trend, we will see new all time highs this year when it comes to computing power on the Bitcoin network.

The cryptocurrency launched in 2015. In December of 2015, Bitcoin Core was only just around 10% of the market, after its initial run as a separate blockchain block. The fork has since generated considerable attention, some believe that it might cause Bitcoin to suffer a similar fate because of bitcoin's high price volatility. Some argue the forks could potentially help Bitcoin regain some dominance in the Bitcoin network.

This sentiment is echoed by many financial analysts: in January it hit the same value as Bitcoin and was trading under $600 in the days prior. Bitcoin Core became an overnight hit in March with over 5.9 million transactions, or more than double the 1.4TB peak seen since the launch of Bitcoin 1.1. However, that peak was barely above $500 and it isn't exactly a guarantee of future high. Even then, Bitcoin Core's long term performance had been lackluster, at around 65% in March 2015.

One possible reason for this is the fact that it is a fork, with Bitcoin going from being the top exchange of the blockchain to the top merchant on the bitcoin exchange.

About every four times bitcoin has to deal with a halving. This means that the reward for miners is halved. This is the only way new bitcoins can flow on the market, so effectively you could say that only half of them can be sold to new bitcoins. Currently, including transaction fees, all miners earn between 900 and 1000 bitcoin per day.

Every four years that number is almost halved. The question is whether these half-lives will ultimately affect the available computing power, as miners can earn less and less BTC. And less computing power means that the bitcoin network is less secure. For the time being, this is a hypothetical discussion, but the trend seems to be moving in the opposite direction.

The reward for miners is actually decreasing. You might conclude that, at least until today, a lower bitcoin reward does not result in less computing power. One of the reasons is, of course, because the bitcoin rate has risen disproportionately fast, which means that miners can now earn much more fiat.

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