The bitcoin hashrate has suddenly fallen from about 100 quintillion a second (exahashes) to 70 (pictured above).
The plunge occurred on Monday with it unclear what exactly happened to lead to such fall.
Variations are however common, but it’s rainy season in China where most miners concentrate, with an industrial farm destroyed last month.
If that is related remains unclear with this potentially also being just normal variation although the scale of it is a bit unusual.
The effect may have been slightly slower blocktimes as bitcoin blocks are currently at 1.25MB, up about 25% from the usual circa 1MB.
That’s because difficulty takes some time to adjust. A rise in difficulty may, therefore, have made some hash unprofitable, with a mining boom of sorts goin on in China.
That follows a considerable price increase since the December low of $3,000, with bitcoin reaching a recent high of $14,000 before settling at circa $10,000.
The significant increase in hash, however, may have led to miners operating at near cost, with our own calculations estimating overall costs to mine a bitcoin now stand at about $9,000.
Considering there are millions of machines securing bitcoin, this fall in hash is unlikely to have an actual effect on security, but Emin Gün Sirer, a Computer Science Professor at Cornell specializing in distributed networks, says:
“If you operate an exchange, or a merchant that accepts BTC directly (but let’s be honest, no one does that), you should increase the number of confirmations when you see a hashrate drop exceeding 30%.
The number of confirmations Satoshi [Nakamoto] calculated in the whitepaper, 6, isn’t some magic number. It’s based on an assumption that the attacker has at most 30% of the hashrate.
If >30% of the hashrate suddenly disappears, exchanges should up the number of confirmations required.
Simple exercise: suppose you see 51% of the hashrate disappear. What should you do? Stop accepting payments.
What about 49%? Number of confirmations should be INFINITY. 48%? Thousands of blocks. 40-something? Hundreds. You get the idea. 6 isn’t a magic number.”
On the other hand, the value of a payment should perhaps be considered too. If it is $1,000 worth of bitcoin, or something like that, then miners – even a rogue employee – are not going to put their whole business at risk.
If it is hundreds of millions, then obviously you should be waiting quite a bit, but realistically this drop in hash probably has more to do with mining costs or maybe some natural disaster at some farm area, instead of any double spending, with claims this drop was due to the annual end of the free hydro powered electricity from the rainy season in Sichuan, China.
The plunge occurred on Monday with it unclear what exactly happened to lead […]