Chinese regulators are shutting down mining operations throughout the country. The hash rate has dropped drastically and many people are concerned that Bitcoin could face a crisis that could not only affect the market, but also the Bitcoin network itself.

Today we are going took a look why all these things are important, but are not affecting the functioning of the network itself.

China bans Bitcoin mining

Bitcoin has always been heavily regulated in China, but only recently Chinese regulators pushed miners out of business. Most headlines that evolve around China banning something usually mean that regulators are about to enact a rule that has been established way earlier.

Bitcoin mining is a little bit different. Trading activities on the other hand have always been closely monitored. With Bitcoin mining all of a sudden under scrutiny the market crashed. After Bitcoin miners had effectively to shut down their operations the hash rate took a dive as well.

This makes the network a little bit more inefficient, because there is a very sophisticated mechanism that ensures that miners and their hash power is never unbalanced for a longer period of time.

The mining difficulty adjusts

The mining difficulty is the very mechanism that adjusts according to the hash rate. If the hash rate is growing, then it will become increasingly difficult to mine a new block. With the miners shutting down the difficulty adjustment will also decrease.

But the difficulty is not adjusting fast, but rather slowly. It is expected that for the first time in Bitcoins history the difficulty is about to drop for a whopping 25 %. That being said, right now miners have to deal with a very high difficulty without brining enough hash rate to the market. This creates an inefficiency that will be accounted for as soon as the difficulty adjusts.

Will Bitcoin transaction work?

Yes, they do! And they won’t stop from working, no matter if the hash rate has dropped or the difficulty adjustment has yet to happen. The adjustment itself is part of Bitcoins approach to control the monetary supply of BTC within a decentralized network.

Even though there has never been a situation like this, but things are going according to plan. It is perfectly safe to send, receive or to store Bitcoin on the network. In fact, this is perhaps one of the best occasions to prove that Bitcoin is truly unstoppable.

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