If your Bitcoin transactions have been abnormally slow and slightly expensive over the past 10 days, you're not alone.
Recently analysts across the industry have noted that BTC blocks, which contain transactions, have been mined at an extremely slow pace, well below the algorithmically-enforced 10-minute average that was coded into the blockchain by Bitcoin creator Satoshi Nakamoto.
Digitalik.net, a data analyst, has chronicled this blockchain slowdown. On the morning of March 25, he remarked that there were only three BTC blocks mined in a three-hour period, 84% below the 18 blocks that would typically have been mined during that length of time. On March 17, he also noted that during a 12-hour period on that day, 48 blocks were mined, which “is 32% less than expected."
The bottom line: block times have been slower while the demand for transactions has remained high. As a result, the average fee to send Bitcoin rose from $0.40 at the start of the month to a March 20 high of $1.76, data from BitInfoCharts.com shows.
But there's a fix: the automatic mining difficulty adjustment. At approximately 11 pm Eastern Daylight Time on March 25, approximately four hours after this article's publishing, the mining difficulty of Bitcoin will drop. This adjustment will make it easier for miners, the computers processing transactions, to "find" blocks, thereby decreasing transaction times. Assuming demand for transactions stays the same, this means that transaction fees will drop.
According to estimations from crypto data provider BlockChair, the next estimated mining difficulty will be 22% below the current mining difficulty, which would be the largest adjustment ever. Industry data scientist and investor Nic Carter made a different estimation, writing on March 25 that he expects a 15-16% downward adjustment, citing data from his crypto analytics company Coin Metrics.
Whatever the difficulty adjustment turns out to be, it will undoubtedly be one of the largest in the history of the network, as shown in Carter's chart below, which shows the magnitude of all difficulty adjustments across the history of the Bitcoin network.
The imminent decline in mining difficulty is a direct result of Bitcoin's second-worst daily performance ever on March 12, when it crashed from the $7,000s to a low of $3,800.
Although BTC has since recovered to the $6,000s, miners with low profit margins have been forced to turn off their machines to avoid mining coins at an unprofitable rate.
As a result, the hash rate of the Bitcoin network — the amount of computational power being exerted to find blocks — has dropped dramatically, decreasing the chances the remaining miners find a block within ten minutes of the last.
Per data from BlockChair.com, the rolling 24-hour estimate of the hash rate has dropped to 108 exahashes per second over the past few hours. This marks a significant decline from the all-time hash rate high of 136 exahashes per second (data from Blockchain.com).
The incoming adjustment to a mining difficulty is an automated response to the large drop in hash rate.