Bitcoin's mining difficulty is at a record high, dimming the prospects of continued record revenues for miners.
Mining difficulty is a measure of the amount of computing power required for a miner to unearth a new block of Bitcoin. It's adjusted in two-week periods depending on whether the processing power on the network, known as the hash rate, is rising or falling. A sharp rise in hashrate leads to an increase in difficulty.
Difficulty hit a new high of 23.14 trillion on April 2, according to The Block. This is nearly 6% higher than the previous record, set on March 20.
The sharp rise in difficulty reflects the large amount of new hashrate brought online. Hashrate on the Bitcoin network rose by nine exahashes per second to 165 EH/s from March 20. An exahash is one quintillion hashes per second. A hash is a basic cryptographic function, a variant of which is used to unlock new Bitcoin.
Hashrate couldn't keep up with Bitcoin's surging price because of a global shortage in chips. Mining hardware has been commanding a 600% premium on their retail prices as a result.
The surge in processing power means that Bitcoin miners must compete harder to keep collecting record revenues. In March, Bitcoin miners recorded $1.5 billion in revenue, the most ever for a single month. The difficulty adjustment means miners must devote more processing power to unearthing new Bitcoin, reducing their margins.
The chip supply crunch and surging Bitcoin price mean that listed Bitcoin miners have seen their stock prices explode. Firms like Canaan, Riot Blockchain, Marathon Patent Group, Ebang, Hive and Hut 8 Mining have nearly all seen share-price gains that outstrip Bitcoin's performance over the last six months. Bitcoin rose six-fold from September compared to a 19-fold rise for Canaan, according to The Block.