It’s not just the Bitcoin price that’s in a consolidation phase.
Network security has also barely changed in the last two weeks. Bitcoin’s computing power is currently around 138.09 EH/s.
The Bitcoin network calibrates every two weeks based on the total computing power that all miners put in. These miners compete with each other to be able to process transactions.
Based on the Proof of Work mechanism, the protocol distinguishes between the miners. The more processing power you deposit, the greater the chance of a block fee.
The total processing power of all miners is currently 138.09 EH/s. This means that the miners from all over the world take 138,000,000,000,000,000 guesses every second, hoping that one of these guesses will give them the right to make a block.
Because we have agreed with each other that this has to be done every 10 minutes, the protocol changes every two weeks. Yesterday there was another calibration of the network. But hardly anything changed: the difficulty dropped 0.0858%.
Is the computing power increasing? Then the difficulty increases as well. Does the hashrate decrease? Then the guesswork also becomes easier. On average, every ten minutes 900 new BTCs come into circulation and the network processes several thousand transactions at the same time.
Mines of gold and BTC
You could compare the minning of Bitcoin to the mining of gold. Gold diggers gamble for nuggets of gold in the ground. An important aspect here is the gold price.
Is gold getting more expensive? Then the prospectors have more resources to find the gold in the ground. This results in an increase in stock-to-flow.
Put simply: a higher price makes it possible to get more gold out of the ground.
In recent years this number has fluctuated.
This is where Bitcoin differs completely from gold. If the Bitcoin price increases, it is also more profitable for miners to use computing power. But this does not result in a changing stock-to-flow ratio. Bitcoin issuance is almost predictable because it is calibrated every two weeks.
With gold, we don’t know how much of it is in the ground. As a result, the scarcity of these assets is not verifiable. On the other hand, history has shown that gold is very reliable.
If Bitcoin becomes more expensive, it does not increase the number of Bitcoin in circulation. Investments in Bitcoin mining do not result in overproduction of Bitcoin. On the contrary, it provides additional security.
It is more difficult for a malicious party to gain a share in the network in order to censor or launch a 51% attack.
The big difference between gold and Bitcoin is the difficulty adjustment, which takes place every two weeks. Just like it happened yesterday with a drop of 0.08%. Despite the fact that this figure hardly changed yesterday, it’s still something to think about.
Michael Saylor, CEO of MicroStrategy, briefly explains this aspect in an interview with Stansberry Research in fifteen minutes.