Between Ethereum's shift to Proof-of-Stake and the sudden collapse of a top 5 Bitcoin mining pool, Q3 2022 was yet another rough patch for Proof-of-Work enthusiasts.
Still, BTC hashrate has steadily marched upward, tipping a new all-time-high at a 30D average of 225 EH/s 📈
Also joining the ATH hashrate club is none other than EthereumClassic, the forgotten fork left lingering in the wake of ETH's 2016 "DAO Hack"
Approximately 25% of Ethereum's hashrate has found a home in ETC, though miner enthusiasm already appears to be waning.
With increased Bitcoin hashrate inevitably comes an uptick in mining difficulty. The past 4 adjustments have all sent difficulty sharply higher, with a 9.26% increase at the end of August.
(Luckily for miners, we're slated for a downward adjustment in just a few dozen blocks)
Of course, difficulty could go up, down, left, or right— it won't make much of a difference for battered miner margins with Bitcoin sitting at just 19K.
Hashprice and Hashvalue remain at their lowest levels YTD at 7.5 cents per TH/s and 400 Sats per TH/s, respectively
The underlying cause of the Poolin liquidity crunch remains unclear.
Some speculate the issues resulted from the firm's recent foray into DeFi yield farming, while others point to problems with Poolin's self-mining operations in Texas.
In any case, the freeze spurred a massive exodus from the mining pool, with Poolin's hashrate falling by nearly 50% in a matter of days.
While there's no direct way to measure a pool's hashrate, we can estimate their share by combining statistical avgs. + on-chain fingerprints
Luckily, many pools leave a "miner signature" in each block's coinbase transaction (not to be confused with the popular crypto exchange)
This tx contains the miner reward— currently 6.25 BTC per block— but also leaves some extra space for arbitrary data
Interestingly, Poolin’s signature has seen some variation, w/ the pool obfuscating their identity following China's mining exodus.
This made their share more difficult to pinpoint over a short period, but the mystery signatures happen to be linked to other Poolin blocks 👀
Some also note that Poolin's troubles could be related to their pool payout structure.
In the early days of Bitcoin mining, pools leveraged "proportionate" payout models, distributing rewards to miners in real-time as blocks were discovered by the pool.
As mining became more competitive, however, many pools— including Poolin— embraced a newer payout structure known as Full-Pay-Per-Share (FPPS).
While this model offers additional predictability for miners, it can also expose the mining pool to the risk of short-term imbalances.
No matter the cause of Poolin's predicament, they now face an existential crisis.
During the '21 bull run, the pool raked in as much as 11M/day in total miner revenue. Today, they struggle to muster 1/10th that sum, surrendering share to more well-capitalized competitors
Above all else, this episode speaks to the cutthroat nature of the mining pool business.
At the slightest hint of trouble, stakeholders can easily redirect their mining power to a competing pool, enforcing discipline and transparency via a ruthless hashrate democracy🗳
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I'll be back in Q4 for another Mining Special, so stay tuned 😎this twitter thread.