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This is the consequence of the sudden loss of mining power. The increased usage of Bitcoin transactions while the blockchain is now processing fewer transaction

This is the consequence of the sudden loss of mining power. The increased usage of Bitcoin transactions while the blockchain is now processing fewer transactions means the fees increase, because users are willing to pay that much to transact faster. Ideally market powers would offset this by people with spare CPU time beginning to mine to pick up the slack, since profitability is up. However due to the development of specialized mining hardware, mining isn't elastic anymore and so it doesn't happen. Because of that the fees will not decrease until the next difficulty adjustment which is every two weeks, or until the miners come back online.

ahelwer 5y ago
Here's a gap in my understanding: why does bitcoin mining explode so much when the price goes up? With all the new miners, doesn't the difficulty adjustment kick in after two weeks and largely negate the price increase? Or does the difficulty scaling not quite work like that?
- X6S1x6Okd1st 5y ago
  The difficulty adjustment only goes up by a certain amount, and you'd only expect mining and difficulty to normalize when it's a margin driven business. If there is some limiting factor (e.g. not enough hardware, not enough power etc) or if price is increasing faster than bitcoin mines can come online then the difficulty adjustment can't keep up. Other coins have solved this, in fact bitcoin cash had to solve it as soon as the fork happened because it would have taken too long to hit an adjustment period.
- swinglock 5y ago
  The difficulty is what adjusts the distributed time function of the network to stay on target, so that the inflation is controlled, measured in Bitcoins. The Bitcoin network only knows about Bitcoins, not how much USD it trades for. When the blocks being mined approximately every 10 minutes is valued higher in USD, naturally more people want more of those blocks. So the miners expand simply to compete, since what they compete for is worth more.
- noxer 5y ago
  With the current price large miner make huge profits anyway. Mining a bitcoin on average coasts way way less then its worth so obviously if the price increases the profit does too and the difficultly adjustment doesn't take that all away.
- ufo 5y ago
  The difficulty adjustment ensures that, on average, there will always be 6 bitcoins minted every 10 minutes. If the price of the bitcoin increases, miners will be willing to spend more energy to chase those 6 bitcoins. The end result is the network becomes less efficient, as more energy is burned to confirm the same number of transactions. If difficulty adjustment didn't exist then mining would still be as easy as it was in the satoshi days. The current ASICs would have already finished mining all 21M bitcoins several times over.
  - bavell 5y ago
    > ...on average, there will always be 6 bitcoins minted every 10 minutes Just to clarify a bit further, this is true right now but the amount minted with each block isn't constant and decreases over time. More info on block rewards: https://www.bitcoinblockhalf.com/ https://www.bitcoinblockhalf.com/
X6S1x6Okd1st 5y ago
Looks like next difficulty adjustment is estimated to be in ~11 days, also in the last 24h there's been an average of a block every 10 minutes, so it's possible more mining power has already come back online. https://blockchair.com/bitcoin/ https://blockchair.com/bitcoin/

ahelwer 5y ago

Here's a gap in my understanding: why does bitcoin mining explode so much when the price goes up? With all the new miners, doesn't the difficulty adjustment kick in after two weeks and largely negate the price increase? Or does the difficulty scaling not quite work like that?

X6S1x6Okd1st 5y ago
The difficulty adjustment only goes up by a certain amount, and you'd only expect mining and difficulty to normalize when it's a margin driven business. If there is some limiting factor (e.g. not enough hardware, not enough power etc) or if price is increasing faster than bitcoin mines can come online then the difficulty adjustment can't keep up. Other coins have solved this, in fact bitcoin cash had to solve it as soon as the fork happened because it would have taken too long to hit an adjustment period.
swinglock 5y ago
The difficulty is what adjusts the distributed time function of the network to stay on target, so that the inflation is controlled, measured in Bitcoins. The Bitcoin network only knows about Bitcoins, not how much USD it trades for. When the blocks being mined approximately every 10 minutes is valued higher in USD, naturally more people want more of those blocks. So the miners expand simply to compete, since what they compete for is worth more.
noxer 5y ago
With the current price large miner make huge profits anyway. Mining a bitcoin on average coasts way way less then its worth so obviously if the price increases the profit does too and the difficultly adjustment doesn't take that all away.
ufo 5y ago
The difficulty adjustment ensures that, on average, there will always be 6 bitcoins minted every 10 minutes. If the price of the bitcoin increases, miners will be willing to spend more energy to chase those 6 bitcoins. The end result is the network becomes less efficient, as more energy is burned to confirm the same number of transactions. If difficulty adjustment didn't exist then mining would still be as easy as it was in the satoshi days. The current ASICs would have already finished mining all 21M bitcoins several times over.
- bavell 5y ago
  > ...on average, there will always be 6 bitcoins minted every 10 minutes Just to clarify a bit further, this is true right now but the amount minted with each block isn't constant and decreases over time. More info on block rewards: https://www.bitcoinblockhalf.com/ https://www.bitcoinblockhalf.com/

X6S1x6Okd1st 5y ago

Looks like next difficulty adjustment is estimated to be in ~11 days, also in the last 24h there's been an average of a block every 10 minutes, so it's possible more mining power has already come back online. https://blockchair.com/bitcoin/ https://blockchair.com/bitcoin/