BTC Mining Recovers—Will ETH Outclass it With New Upgrade?
Prior to China’s crackdown on cryptocurrencies, nearly 70% of Bitcoin’s hashrate came from China. Since mid-May, the BTC hashrate has dropped almost 50%, leading to many qualms surrounding the viability of the network, as hashing power is essential to keep Bitcoin safe from attacks. Despite the major loss in miners, the on-chain data shows that miners are still bullish on BTC.
Additionally, as Bitcoin mining takes a major hit, will Ethereum’s new EIP-1559 fee structure prove successful? Ethereum is following the trend toward Proof of Stake and the drastic reduction of the need for computing power. Bitcoin does not have the flexibility to make this change, possibly giving Ethereum the upper hand in terms of consensus mechanism.
BTC Mining on the Comeback
The extreme loss in hashpower caused a major shock across the network, which is now being referred to as the Great Migration. While price did see an adjustment, the tough $30k support has yet again shown its power. An element of the support may have been the widespread miner HODLing. Normally, miners will spend their BTC rewards, but since the Chinese rigs went offline, most miners have not sold BTC — an unprecedented occurrence.
While Bitcoin continued performing, the Great Migration did cause a backup in the network. This caused block times to shoot through the roof, reaching 32 minutes, while the target block time is 10 minutes. As seen below, the network has corrected and block times are back down near target levels.
As hashpower has gone drastically, the mining difficulty has been adjusted accordingly. Now, BTC mining difficulty is at levels not seen since over a year ago. At that time, BTC price was less than $10k, compared to more than three times that today.
The adjustment shows the resilience and adaptability of the Bitcoin network, as blocks are now going through at much more adequate times. As mining rigs continue to come back online and block times stay steady, difficulty will climb back up.
Ethereum Mining is Changing Quickly
While Ethereum did see a decrease in hashpower that coincided with that of Bitcoin, it was nowhere close to as extreme. Ethereum has already shown much more recovery from this drop, as ETH is up 9% over the past week.
Just yesterday, Ethereum core developers announced that EIP-1559 will be implemented on August 4th. The upgrade is planned to change the fee breakdown for the network, which will lead to miners making fewer profits. The upgrade could possibly drive miners to support Bitcoin, especially as miners will soon not be needed on Ethereum.
A piece of the delayed Ethereum 2.0 upgrade is changing the consensus mechanism to Proof of Stake. PoS allows ETH holders to stake their tokens and run light software to validate blocks. The validator selection is randomly picked from the pool of ETH, meaning that those with the most staked have the highest chance to be chosen.
This system aligns user intentions; those with the most ETH have the most at risk, and thus have the most power in the network. PoS has shown success on other 3rd generation blockchains, as it completely eradicates the need for immense computing power.
The Bitcoin network has taken a massive hit, while Ethereum seems to be advancing forward with various planned updates. How will this deviation impact the dominance of each coin? Let us know in the comments.