Welcome to the first issue of the official Poolin newsletter! We will be releasing updates on a bimonthly basis in lockstep with bitcoin’s difficulty adjustment. Each issue will go over our latest news, upcoming events, and provide analysis on recent trends in mining across the various cryptocurrency networks that we work to secure.
News
Last week, Poolin along with partner Three Arrows Capital sponsored a mining infrastructure summit in Chengdu, called Hashcon2020, where Poolin’s CEO Kevin Pan and VP of Finance Qian Xong gave a talk on the latest bitcoin protocol improvement proposal: Taproot.
The Taproot proposal includes BIPs 340, 341, and 342 (see here) and represents the latest upgrade to Bitcoin’s protocol layer. Originally proposed by Gregory Maxwell, who was also at the Chengdu Mining Summit, Kevin and Qian explained that Taproot offers enhanced multisignature functionality for bitcoin addresses with increased privacy by utilizing Schnorr Signatures.
This protocol development will need to be implemented as a soft-fork by nodes and miners on the network, and the community is currently debating best practices in order to effectively implement broad adoption. The last major soft-fork of the network was SegWit in 2017, but Taproot has been much less contentious as leaders in the industry have been informing network participants on the modest but worthwhile improvements.
In other news, this past weekend, Poolin VP Alejandro De La Torre participated in a panel on the Future of BTC Mining Pools, which was part of the FutureProof Technical Summit, organized by Blockstack and Dystopia Labs (recorded here).
On the panel, Alejandro underlined the continued growth in mining despite the halving, and provided insight into how different countries are positioning themselves with respect to cryptocurrency mining. Alejandro also emphasized how bitcoin is decentralized, anyone can mine bitcoin right now, and that proof of work has a proven track record to maintain a competitive, secure, and open marketplace.
Analysis
Bitcoin’s last difficulty adjustment was on August 10th (block number 643,104) where the difficulty saw a modest increase of 0.59% from 16.85T to 16.95T (see more). The current difficulty adjustment has brought the network up by 3.63% to 17.56T. Below you can see in dark blue the stepwise function of bitcoin’s difficulty adjustment, while the red line shows the average block interval over time. Recently, you can see that the network has been consolidating just below the 600 second (10 minute) standard, which is why the difficulty is increasing.
While there is a lot of excitement about the potential for a new bitcoin bull market, caution is still in the air. In the last two weeks, the price of bitcoin has been range-bound between $11,130.00 and $12,473.00 USD.Nevertheless, these new yearly high prices have been lucrative for miners who are enjoying nearly $0.10 USD per Terahash per day, which has also allowed older generation miners to come back online.
Bitcoin’s network hash rate began the last difficulty period at 121.67 EH/s, peaked at 131.52 EH/s on August 16th, and has since fallen to 120 EH/s today. While the price of bitcoin has increased allowing older machinery to come back online, hashrate has not increased as much as may have been expected due to catastrophic flooding in the Sichuan Basin along the Yangtze River: China’s hydroelectric powerhouse.
Many mining pools that operate in China have experienced drops in hashrate due to the overflow of rainwater and the damage sustained from the heavy storms. Poolin’s hashrate has fluctuated in this period: we started with 19.75 EH/s on August 10th, rose to 20.6 EH/s three days later before sliding down to 16.7 EH/s on August 17th, and have now stabilized around 18.75 EH/s.
China’s monsoon season, the East Asia rainy season, or “meiyu” (literally plum rain) as it is known in China is generally from June to October, bringing strong rains to the southern highlands, which thus creates cheap hydroelectricity given the existing infrastructure.
The rampant precipitation is the result of a weather front that forms as moist air from the Pacific Ocean meets the cooler continental air mass.
Authorities at the Three Gorges Dam, the largest dam in the world, and the main reservoir of the Yangtze river that forms the Sichuan Basin, raised the discharge volume to a record 48,800 cubic metres per second on Thursday to try and lower water levels upstream, and they might have to increase it again to avoid the possibility of a dangerous overflow.
More than 100,000 people have been evacuated from areas on the upper reaches of China’s Yangtze river, including many mining operations for safety reasons. Sichuan authorities raised its emergency response to the maximum level last Tuesday to cope with a new round of torrential rainfall.
The Yangtze Water Resources Commission, the government body that oversees the river, declared a red alert saying water at some monitoring stations was expected to exceed “guaranteed” flood protection levels by more than five metres (16.4 feet).
On Friday, officials announced that the flow into the Three Gorges dam had eased somewhat, though they remained on alert. “The flood control pressure on the middle and lower reaches of the Yangtze River has been reduced,” the government’s Xinhua news agency reported.
Wolfie Zhao reported for Coindesk that, “since the intense flooding began, bitcoin mining pools in China have seen hashrate drops of between 10% and 20% over the course of continuous rainstorms in Sichuan.”
“Heavy rainstorms have caused electricity outages in parts of the region as hydro-plants stop generating power to help discharge the floods. Some counties are also experiencing telecommunication and internet breakdowns, said Kevin Pan, CEO and co-founder of Poolin.” Keep reading here.
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