Emiliano Grodzki is CEO and founder of Bitfarms, one of the largest public bitcoin mining operations in the world.
What I learned from the Bitcoin Hash rate decrease
Bitcoin was picked up late. However, over the weekend, panic erupted following a significant drop in the network hash rate, down by about 49%, the largest 24-hour reduction in Bitcoin history.
There is much speculation about the cause of this, including coal mine explosions and power outages in China’s Xinjiang province. And with the decrease in the Bitcoin hash rate, a price correction pushed its value to a minimum of ~ 50,000 USD. However, despite the panic sale, we did not break the important level of $ 50,000. Why?
Simply because Bitcoin continues to work 100%, despite the declining hash rate. Transactions are processed, blocks are extracted, and currencies continue to be traded and exchanged freely.
Bitcoin’s hash rate may have dropped by more than 40% in a single day, but what global monetary standard or payment network could survive something similar and not refuse a single-user service? Fast? Visa? MasterCard? The dollar, the pound, the euro or the yen? I’m not.
Far from being a concern about the direction of Bitcoin, this is a testament to the resilience of the Bitcoin protocol and the power of its decentralized design. Regardless of any entity that operates, Bitcoin cannot be stopped by any event, which is quickly achieved by parliamentarians and global governments.
According to Garrick Hileman, head of research at Blockchain.com and a colleague at the London School of Economics, 2021 is the year governments will start using bitcoin. He puts this on oversized government spending and money printing and on economic and geopolitical tensions between the United States and China.
Of course, whether these factors push governments to resort to bitcoin, thanks to the millions of people around the world, 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 a miner, the Bitcoin network will continue.
Of course, the processing of the blocks would be slow, but they would be processed and, after a period of time in which 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 swellings on the way to smooth, but what is being created with Bitcoin is a new monetary system for anyone who understands what is wrong with the current one. Open, transparent, resilient and voluntarily motivated by economic incentives, Bitcoin is now too big to fail.
A sale due to temporarily slower lockout times is supported by no other reason than panic and is a strong indicator of how much new money has recently entered bitcoin and the learning curve that capital is taking.
Last year showed how bitcoin is not going anywhere soon and how important it will play a role in our financial life in the future. Bitcoin declines will be certain 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.