Good Afternoon from BitOoda!
In our post last week, we specifically talked about BTC difficulty and how this can affect a miner’s revenue flows. We referred to a trade that one of our mining clients put on with the BitOoda Difficulty™ swap to protect against the difficulty increase as we were going into the wet season in China. In this piece we will explore hash-rate/hashpower and how it pertains to difficulty.
The reason that difficulty either increases or decreases, has to do with the hash-rate that is on the network mining blocks. A way to think about this would be think about water pressure at a faucet, If the pressure increases (more hashpower), the water flow coming out of the faucet increases (more bitcoin blocks being mined). The faucet valve is adjusted periodically (difficulty changes) so that the flow goes back to where it needs to be.
In the Bitcoin network, given the difficulty adjustment every 2016 blocks, we can see that this adjustment often occurred before the 2 weeks as the hash-rate of the network kept moving up.
Below is a chart showing hash-rate by the difficulty periods in November and how many blocks were mined each of those days.
You can see that hash-rate peaked on November 23rd to 111 EH/s with a total of 173 blocks mined. The threshold for the number of blocks that should be mined without a change to difficulty would be 144.
Not only is difficulty a factor a miner needs to consider, but hash-rate is as well, given that as more hash-rate comes online you will start to lose your share in the network if you don’t add more machines.
One factor that miners should be wary about is the upcoming halving set to take place at block height 630,000, which is approximately set to happen during the first half of May. During the halving event, Bitcoin’s block reward will be cut in half from 12.5 BTC to 6.25 BTC. This can be a drastic blow to a miner’s revenue.
We believe this event would cause some miners to come offline as they would be operating at a loss.
As we have stated last week, here at BitOoda we strive to help create different strategies for miners to implement to make their non-static revenue more static. One of the strategies we’ve created is called BitOoda Hash™ contract. This contract lets the miner lock in their revenue for a fixed amount of time.
This contract works by the miner(producer) selling their hashpower forward to a buyer for a fixed period. The buyer of the contract will pre-pay the entire contract and will start receiving daily payouts of BTC into their account. The benefit to the buyer would be that they get a discount to the current BTC price.
If you are looking for creative ways to get exposure to BTC at a discount, we believe this is a great way to do just that. Also, if you’re a miner this is a great way to self-finance your operation if you are looking to expand.
If you have any interest in either side of this contract, please feel free to reach out to email@example.com.