Emiliano Grodzki is CEO and founder of Bitfarms, one of the largest public bitcoin mining operations in the world.
What we learned from the decline in the Bitcoin rate
Bitcoin is booming. Over the weekend, however, panic erupted after a significant drop in its network hash rate, by about 49%, the largest 24-hour reduction in Bitcoin’s history.
There is much speculation about the cause of this, including coal mine explosions and power outages in electrical grids in the Chinese province of Xinjiang. And with a decline in Bitcoin’s hash rate, a price correction pushed its value to a low of ~ $ 50,000. Despite the panic sales, however, we did not break the important $ 50,000 level. Why?
Simply because Bitcoin continues to decline 100% despite the hash percentage decline. Transactions are processed, blocks are mined and coins can be freely traded and exchanged.
The hash rate of Bitcoin may have dropped by more than 40% in one day, but what global monetary standard or payment network can survive something similar and not deny one user’s service? Quickly? Visa? Mastercard? The dollar, the pound, the euro or the yen? There is no one.
This is a testament to the resilience of the Bitcoin protocol and the strength of its decentralized design. Regardless of any single entity to function, Bitcoin can be thwarted by any single event, which global lawmakers and governments quickly realize.
According to Garrick Hileman, head of research at Blockchain.com and a fellow student at the London School of Economics, 2021 is the year governments start doing bitcoin. He puts it down to excessive government spending and money pressure and economic and geopolitical tensions between the United States and China.
Regardless of whether these factors encourage governments to turn to bitcoin, it is thanks to the millions of people worldwide that Bitcoin exists. By investing our capital, time and effort in bitcoin mining and its infrastructure, we choose that Bitcoin exists. And as long as there is one miner, the Bitcoin network will continue.
Sure, the processing of blocks would be slow, but it would still be processed and after a period when 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 bumps in the road to making it smoother, but what is being created with Bitcoin is a new monetary system for anyone who understands what is wrong with the current system. Open, transparent, resilient and voluntarily driven by economic incentives, Bitcoin is now too big to fail.
A sell-off due to temporarily slower block times is not backed up for any reason other than panic and is a strong indication of how much new money has recently come into bitcoin and the learning curve that capital is undertaking.
The past year has shown how bitcoin is going to go nowhere soon and how important it will be to play an important role in our financial lives. Decline in bitcoin’s value will be certain in the future, but the outlook has never looked so bright.
This is a guest post by Emiliano Grodzki. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.