- Following China's closure of mining farms,
Bitcoin 's mining difficulty dropped significantly because the hash rate plunged. - Mining difficulty is the time taken to mine each block, and it dynamically varies depending on the network's total hash rate.
- On the other hand, Ethereum briefly overtook Bitcoin with more active addresses, and the two are now closely trailing each other.
Ethereum stepped up its game and briefly had more active addresses than Bitcoin this month. That means more people exchanging Ether with each other than those swapping Bitcoin.
“With numerous tokens being launched for each of these use cases, it is not surprising that ETH has surpassed BTC in terms of active addresses,” Vikram Subburaj, co-founder and CEO of cryptocurrency exchange Giottus, told Business Insider.
Meanwhile, China’s recent clampdown due to energy concerns created a huge Bitcoin hash rate deficit globally. Even though it may sound like a bad thing, it actually means active miners can mine new coins more conveniently.
However, the Bitcoin anomaly is said to be short-lived as miners are actively migrating out of China. Experts believe that the setback is temporary and that Bitcoin will emerge more vital than ever before, with other regions offering more affordable and green energy.
It has become easier to mine Bitcoins — for now
Mining for Bitcoin is how new coins are brought into circulation. And, it’s necessary in order to maintain the ledger on which the entire system is based. It’s a process that involves solving math problems.The more people there are mining for Bitcoin, the more difficult the puzzle. And, fewer people would result in the puzzles being easier. It is denoted by the time taken to mine each block, and it dynamically varies depending on the network's total hash rate.
So, when China started closing down mining farms, there were fewer people fighting to verify transactions. As a result, Bitcoin's mining difficulty dropped significantly as the hash rate plunged. China contributed 65% of all Bitcoin hash rate in May, hence a crackdown has affected the global hash rate by a whopping 40%.
“The observation of a 28% drop in Bitcoin (BTC) mining is coinciding with the large exodus of miners from China to regulatory friendly nations in Europe and North America,” explained Subburaj.
A boon for those who aren't affected due to China's closure
The drop in mining difficulty also means a lot more cash is going to the Bitcoin miners who remain online. Transaction fees also plunged, inversely contributing a $1000 surge in Bitcoin's value, especially since new people aren’t likely to sign on. “Given that BTC pricing has dropped by over 40% in the last two months, new miners are no longer incentivized to start operations,” said Subburaj.
Bitcoin's mining difficulty is designed to adjust itself every 2016 blocks based on the total hash rate racing on the network. If block production becomes faster than 10 minutes, the system will automatically increase difficulty.
Ethereum was bigger than Bitcoin, even if it was just for a few hours
It's impossible to gauge how long it'll take to get Bitcoin’s hash rate back up. But the correction has become an opportunity for Ethereum — the world's second-largest cryptocurrency network by market cap.
Ether's rise suggests that the demand for Bitcoin is faltering as users are now opening up to viable alternatives. According to Bitinfocharts, Ethereum briefly overtook Bitcoin with considerably more active addresses on June 28, and the two are now closely trailing each other. Active addresses simply show us the number of active users or available senders and receivers for a particular token in the network.
What is Ethereum?
The jump in Ether’s participation comes barely a month after Bitcoin hit a milestone of one million active addresses in June — a sight unseen since November 2017.
Ethereum is often touted as a modern version of Bitcoin, which has far more functionality and a robust network that can deal with current requirements and is future-ready.
Its smart contracts are self-executing and can facilitate, verify, and enforce transactions within the blockchain. It creates an excellent medium for experimentation, giving rise to non-fungible tokens (NFTs), initial coin offerings (ICOs), and stablecoins.
Ethereum also supports decentralised finance (DeFi), a concept that can potentially change how peer-to-peer lending works. And, most importantly, future updates are expected to reduce its energy requirements by 99%.
While Bitcoin has popularised the concept of a cryptocurrency, it could be Ethereum that truly stands out in the long run. With its flexibility and robustness, new applications continue to emerge, and increased scalability in the future will extend to support development.
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