Bitcoin, still high profits for miners despite the difficulties

Bitcoin, still high profits for miners despite the difficulties


Two weeks ago, with a 13% increase, the difficulties for bitcoin miners grew in finding new blocks and earning rewards. Yesterday, the bi-weekly adjustment of the mining difficulty recorded an increase of 4.5% at block 699551. "Difficulty" refers to the relative measure of the amount of resources needed to mine bitcoins. This measurement adjusts up or down depending on the amount of energy consumed (or "hashrate" produced) by the network at a given time. The bitcoin protocol is set to adjust the difficulty level every 2,016 blocks, or roughly every two weeks, to ensure that new blocks are mined at a stable rate.

Bitcoin mining is getting more expensive as the difficulty of mining has been increased by the huge amounts of existing computer resources dedicated to the activity itself, as well as by increased competition among miners to find new blocks. However, the recent bull run of the world's largest cryptocurrency has offset the rising costs, keeping the bitcoin mining business highly profitable.

Ph. Marco Verch In addition to the recent bitcoin bull run, the Record revenue margin is also partly due to the State Council of China ordering local authorities to shut down cryptocurrency mining sites in May. This shutdown resulted in the recall of around one million mining machines in China. Thanks to this decision, those miners outside of China who were able to stay online have seen their competitiveness increase as the field of miners competing to find new blocks has suddenly shrunk.

The latest 4.5% increase in mining difficulty pales alongside the surge two weeks ago when the difficulty increased by 13%. The slower growth could be attributed to limited hosting capacity around the world, said Azam Roslan, senior sales associate at New York-based mining hosting provider Wattum.

While miners and hosting service providers are rushing to build new infrastructure, the hosting offering has been far from completely absorbing all second-hand machines from China and large quantities of new machines ordered by public miners in North America such as Marathon and Riot.

Bitcoin is now legal currency in El Salvador — but its rollout hits major snags


El Salvador officially adopted bitcoin as a legal currency on Tuesday, becoming the first country to do so. However, several hours into the first day, the launch of Chivo, the government's digital wallet app that allows Salvadoran citizens to transact in the volatile cryptocurrency, suffered snags and the price of bitcoin fell as much as 10% as of early Tuesday afternoon.

Bitcoin can now be used as a legal tender for any business that can support and process transactions with it, months after the Latin American country's congress approved the move. While the financial world awaits how El Salvador executes the rollout, the country's president, Nayib Bukele, suggested on Monday that there would be a 'learning curve.'

'Every road to the future is like this and not everything will be achieved in a day, or in a month. But we must break the paradigms of the past, ' he tweeted in Spanish. 'El Salvador has the right to advance towards the first world.'

a little girl standing in front of a building: A woman buys in a store that accepts bitcoins in El Zonte, La Libertad, El Salvador on September 4, 2021. / Credit: MARVIN RECINOS/AFP via Getty Images © Provided by CBS News A woman buys in a store that accepts bitcoins in El Zonte, La Libertad, El Salvador on September 4, 2021. / Credit: MARVIN RECINOS/AFP via Getty Images

Bitcoin's first official day as a legal currency in El Salvador hit some snags. On Tuesday morning, Chivo was temporarily disconnected to 'increase the capacity of its [computer] servers,' Bukele said, as Salvadorans rushed to use the app, which gave out users $30 worth of the cryptocurrency after signing up. As bitcoin prices were falling during hitches with Chivo, Bukele said the country bought 150 more of the cryptocurrency at a 'discount' after purchasing 400 bitcoins a day earlier.


Meanwhile, some fast food chains operating in El Salvador, such as McDonald's and Pizza Hut, have already begun to accept bitcoin as a form of payment in the country. One Twitter user, who was retweeted by Bukele, said he bought his coffee at a McDonald's in San Salvador using bitcoin.

Bukele championed the cryptocurrency as a way for Salvadoran citizens to easily send and receive money from abroad, since El Salvador's economy depends heavily on what are called called remittances. According to World Bank data, remittances to the country made up nearly $6 billion — or almost 20% of its gross domestic product — in 2019. Buekele previously said bitcoin could improve financial inclusion and access to wealth in a desperately poor nation.

As legal tender in El Salvador, bitcoin can be used in any transaction and businesses will have to accept that payment form, according to the legislation passed in June. The law also states that tax contributions can be paid via bitcoin and exchanges in the cryptocurrency will not be subject to capital gains tax.

Under the new law, El Salvador will 'promote necessary training and mechanisms so that the population can access [bitcoin] transactions.' However, those who do not have access to technologies that can carry out bitcoin are excluded from being required to accept it as payment.  The U.S. dollar and bitcoin are the country's official currencies.

The move brings financial risks to ordinary Salvadorans and their country, experts say, as the cryptocurrency gains and loses huge amounts of value in a flash — and at times overnight. El Salvador is one of the poorest countries in the region, and Bukele is seeking a $1 billion program with the International Monetary Fund, which raised concerns about the adoption of bitcoin.