Has The Bitcoin Hash Rate Gotten Too High?

Miners supply a last line of defense for protecting the Bitcoin network against brute-force attacks from destructive stars who may accumulate a bulk of SHA-256 hash rate. The more hashing power is spent finding new blocks for the longest Bitcoin chain, the more protected the funds on the trillion-dollar network will be. Despite a significantly depressed bitcoin price, however, which is currently sitting more than 50% below its latest all-time high, the networks hash rate continues growing and has actually set brand-new record highs multiple times this year. In reality, hash rate might be the only bitcoin chart still increasing and to the right in the current market stage. How much hash rate is enough? And does Bitcoin have too lots of miners?This short article takes a little unorthodox and potentially undesirable appearance at hash rate subsidies and offers a surface-level factor to consider of present hash rate levels from the perspective that Bitcoins security would not be meaningfully endangered if hash rate materially declined from its current near-record levels.To be clear, this concept has nothing to do with energy issues over mining activity. It only thinks about the future of mining economic rewards, their impact on network security and a minimum feasible hashrate (MVH) level for Bitcoin.Who Cares About Too Much Hash Rate?A reasonable reader may ask themselves (or madly message this author on Twitter), “Who cares if Bitcoin hash rate is expensive?” This is a fair concern to which the responses are twofold.Some hash rate is most likely to fall off in a couple years after the next block reward halving. This isnt a really important advancement, but as bitcoin-denominated mining subsidies drop (again) by 50%, partially less-efficient hash rate will undoubtedly be ejected of the market. The chart below programs small immediate modifications in bitcoin hash rate 30 days after each of the previous three halvings: There are instant modifications to the Bitcoin hash rate right after subsidy halvingsAlso, mining earnings from transaction charges is very low. This fact has actually prompted loads of criticism about Bitcoins long-lasting security budget across the industry, from Bloomberg reporters to Ethereum researchers and others. One action to these critics is to rhetorically ask, “So what?” Another approach is to hypothetically presume the argument is at least partially proper, that future deal cost earnings can not fully support monetary rewards for indefinitely growing hash rate levels, and then to ask, “If decreased miner earnings triggers hash rate to drop, just how much is enough?”The More, The BetterThe mainstream technique (in the small neighborhood that is bitcoin mining) to hash rate growth is typically that more is constantly better than less. Naturally, more hash rate means lower earnings for the marginal mining operation. Why not make every effort for so much hash rate through continued exponential growth of the mining sector that no outside entity would even think about devoting a 51% attack on the network?That quantity of hash rate is essentially where Bitcoin is today, and an objective to preserve or increase it is not bad. Particularly in the first few years of Bitcoins existence, “the more the better” was a fact to live by for hash rate growth.Enter the protocols mining aid. Subsidies Create ExcessSatoshi Nakamoto produced an exceptionally reliable bootstrapping mechanism by means of the mining subsidy. Die or support was the condition of Bitcoins really early years, and Nakamoto showed basic awareness of the procedures early fragility in their response to the 2010 WikiLeaks incident.”No, do not bring it on. The project requires to grow slowly so the software can be enhanced along the method,” they wrote.Subsidies are any type of economic payment, privilege or other reward allocated to speed up or promote a preferred result. Similar to agricultural aids incentivize production of corn, wheat and other products, mining aids incentivize more hash rate. But subsidies are inherently tools for market distortion, and they need to never ever be an irreversible feature in any market. All signs indicate Nakamoto appreciating this economic reality by cutting in half the aid every four years, which will ultimately lead to the subsidized mining income dropping effectively to zero.And the aid works! Consider the recent example of Chinas mining ban. The mining sectors shockingly-rapid recovery to the most significant hostile political advancement in its history shows how strong the economic incentives are to continue mining. Not just did hash rate totally recuperate 6 months after the ban, however as discussed previously in this short article, it continues setting new highs.But every subsidized market ultimately deals with the concern of excess.How Much Hash Rate Is Enough?This post does not try to provide an exact variety of how many exahashes (EH) are the minimum quantity of hash rate needed to protect Bitcoin. Data thats potentially valuable for obtaining this number has actually been talked about at length by thought leaders like Paul Sztorc, Lyn Alden and others. However its a healthy thought experiment for any bitcoin investor to consider their best guesstimate of how much hash rate the network could manage to lose.One miner believes this number could be as much as 25% of the existing hash rate, according to a recent episode of the “Stephan Livera Podcast.” Agreeing that the mining aid is likely funding hash rate the network does not need on the episode, Braiins Insights Lead Daniel Frumkin stated he “wouldnt be extremely worried” about a 51% attack on the network in a situation where hash rate was 150 EH instead of its current 200+ EH level.Of course, with the hash rate near record highs, the Bitcoin network is more protected than ever. Rather of supplying an extensive analysis of minimum feasible hash rate, this article hopefully forces readers to think about that; initially, hash rate may not constantly go up forever; and 2nd, if it does not, Bitcoins security will still be more than okay.This is a visitor post by Zack Voell. Viewpoints expressed are entirely their own and do not necessarily show those of BTC Inc or Bitcoin Magazine.

And does Bitcoin have too lots of miners?This post takes a possibly unpopular and somewhat unconventional appearance at hash rate aids and offers a surface-level consideration of present hash rate levels from the viewpoint that Bitcoins security would not be meaningfully threatened if hash rate materially declined from its current near-record levels.To be clear, this concept has absolutely nothing to do with energy concerns over mining activity. The chart listed below programs minor instant modifications in bitcoin hash rate 30 days after each of the prior 3 halvings: There are immediate modifications to the Bitcoin hash rate right after subsidy halvingsAlso, mining earnings from transaction fees is really low. Not only did hash rate completely recuperate 6 months after the restriction, but as discussed previously in this short article, it continues setting brand-new highs.But every subsidized market ultimately faces the concern of excess.How Much Hash Rate Is Enough?This post doesnt try to provide an exact number of how lots of exahashes (EH) are the minimum quantity of hash rate needed to secure Bitcoin. Agreeing that the mining aid is likely funding hash rate the network doesnt need on the episode, Braiins Insights Lead Daniel Frumkin stated he “wouldnt be overly worried” about a 51% attack on the network in a situation where hash rate was 150 EH rather of its present 200+ EH level.Of course, with the hash rate near record highs, the Bitcoin network is more safe than ever. Instead of offering an extensive analysis of minimum viable hash rate, this post ideally obliges readers to consider that; first, hash rate may not always go up forever; and 2nd, if it does not, Bitcoins security will still be more than okay.This is a guest post by Zack Voell.