Emiliano Grodzki is CEO and founder of Bitfarms, one of the largest public bitcoin mining operations in the world.
What We Learned From Bitcoin’s Hash Rate Decline
Bitcoin has been high lately. But over the weekend, panic ensued after a significant drop in the network’s hash rate, down about 49%, the largest 24-hour reduction in Bitcoin’s history.
There is much speculation as to the cause, including coal mine explosions and power cuts in China’s Xinjiang province. And with a drop in Bitcoin’s hash rate, a price correction pushed its value to a low of ~ $ 50,000. But despite the panic sales, we failed to break the significant USD 50,000 level. Why?
Simply because Bitcoin continues to function 100% despite the drop in hash rate. Transactions are processed, blocks are mined, and coins are freely traded and exchanged.
Bitcoin’s hash rate may have fallen by more than 40% in one day, but what global standard or payment monetary network could survive something similar without a single user being denied service? Fast? Visa? MasterCard? The dollar, the pound, the euro or the yen? There are not any.
Far from a concern about where Bitcoin is going, this is a testament to the resilience of the Bitcoin protocol and the strength of its decentralized design. Regardless of a single entity to function, Bitcoin cannot be stopped by any event, which global lawmakers and governments are quickly realizing.
According to Garrick Hileman, head of research at Blockchain.com and fellow at the London School of Economics, 2021 will be the year governments start hodling bitcoin. He attributes this to excessive government spending and money squeezing and economic and geopolitical tensions between the United States and China.
Regardless of whether these factors prompt governments to turn to bitcoin, it is of course thanks to the millions of people worldwide that Bitcoin exists. By investing our capital, time and effort in bitcoin mining and its infrastructure, we choose Bitcoin to exist. And as long as there is one miner, the Bitcoin network will keep going.
Sure, the processing of blocks would be slow, but they would still be processed and after a certain amount of time when enough blocks were added to the network, the difficulty would be adjusted and the performance and processing times would return to normal levels.
There are still bumps in the road that need to be ironed out, but what is being created with Bitcoin is a new monetary system for anyone who understands what’s wrong with the current one. Open, transparent, resilient, and voluntarily driven by economic incentives, Bitcoin is now too big to fail.
A sell-off due to temporarily slower block times is not supported by any reason other than panic and is a strong indicator of how much new money has entered bitcoin lately and the learning curve that capital is going through.
The past year has shown how bitcoin is not going anywhere anytime soon and how important it will play a role in our financial lives in the future. Declines in bitcoin’s value are sure to be in the future, but the outlook has never looked so bright.
This is a guest post by Emiliano Grodzki. The views expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.