When bitcoin cash forked away from the main bitcoin blockchain, one of the most significant obstacles the new coin faced was attracting hashpower.
During bitcoin cash’s early days, the blockchain was plagued by high difficulty and slow block times. Bitcoin was still far more profitable to mine than bitcoin cash. BCH miners were essentially mining at a loss, either for ideological reasons or on speculation that the bitcoin cash price would rise enough for them to sell the coins at profit. Consequently, the bitcoin cash hashrate lagged far behind that of the main chain, averaging only about 5% of the two networks’ combined hashpower.
Bitcoin Cash Hashrate Approaches Parity with Bitcoin
However, BCH mining profitability ticked upward until it eventually reached parity with BTC. Soon after, a decrease in difficulty, coupled with a Korean-led price surge, made bitcoin cash mining 240% as profitable as bitcoin. That gap has closed due to a recent bitcoin cash price decline, but BCH retains a 68% edge on the original chain.
Once bitcoin cash had surpassed the parity threshold, hashpower began to pour into the BCH network. On August 19, bitcoin cash had less than 4% of the combined hashpower. The next day, the bitcoin cash hashrate had climbed to 20%. By August 21, major mining pools such as AntPool had begun mining bitcoin cash, enabling its network to claim more than one-third of the total hashpower. Today, the bitcoin cash hashrate share increased to 43% and is just 7% away from reaching parity with bitcoin.
The introduction of new miners has provided bitcoin cash with a much more even block distribution. During its first two weeks, a mystery miner (or miners) found more than 90% of the blocks. Now that unknown miner(s) accounts for just 43% of the last 1,000 blocks.
Additionally, Huobi and OKCoin–two of China’s “Big Three” cryptocurrency exchanges–added BCC/CNY trading pairs today. The timing could just be a coincidence, but it is likely that the increase in hashpower helped convince them to add support for bitcoin cash.
This rapid shift in hashpower has caused the bitcoin mempool to swell to a near-record level of 96MB (May 2017 brought a mempool spike of nearly 120 MB).
BCH Mining Profitability Set to Crash
Unfortunately for bitcoin cash, this new status quo will not last. Due to the spike in hashpower, blocks are being found way too quickly. At the current pace, a block is being mined almost every minute. Most blocks are carrying very few transactions, and a significant number are smaller than 1KB.
As a result, the network is about to adjust the difficulty to make it harder to find BCH blocks–much harder. Following this difficulty adjustment, bitcoin cash mining is expected to become far less profitable. As Jimmy Song pointed out, this could cause a significant number of miners to switch back to bitcoin, at least until the bitcoin cash difficulty decreases again:
Note BCH diff. will go up massively in about 24 hrs => less profit. Miners may switch to BTC, causing Segwit activation to come earlier.
— Jimmy Song (송재준) (@jimmysong) August 21, 2017
Anticipating that the bitcoin cash difficulty level will remain volatile for the near-future, several major mining pools have announced services that will allow members to automatically mine the most profitable chain.
Featured image from Shutterstock.