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Luxor Technologies Develops an Efficient Way to Forecast Bitcoin Mining Difficulties

Luxor Technologies is a corporation developing Bitcoin mining products and services that help miners with proof-of-work switching engines, digital commodities, and mining pool infrastructure. The business was founded by software engineers who saw Bitcoin’s potential to become the future’s digital asset.

As a decentralized system, Bitcoin needs constant updates for regular users to be able to use it properly. Many aspects of the blockchain and the needs of miners and investors changed during the cryptocurrency’s development stages, from mining on a basic computer to using special apparatus, holding assets on exchanges, and enhancing the security of digital wallets. Today, you can buy Bitcoin on Binance and keep it in any type of cold or hot wallet, but you need to mine continuously and with the help of expensive computational power.

Given the current situation, the company developed a new way to forecast mining difficulties, which will help miners adjust their systems and adopt the right procedure to protect their assets.

Why Bitcoin’s mining difficulty increased

In 2009, shortly after the release of Bitcoin, miners would only need a computer with a CPU and a regular graphics card to mine the cryptocurrency successfully. As Bitcoin gained popularity, mining became more challenging, requiring crypto enthusiasts to get a powerful mining rig, a specialized computing system made for mining cryptocurrencies. A powerful GPU is needed to solve complex mathematical problems for transaction validation, while an ASIC miner is the upgraded version of this graphics card, but also pricier.

But why have mining requirements changed so quickly, considering Bitcoin has existed for only 14 years? The algorithm of cryptocurrencies dictates that the mining difficulty shifts according to the rate at which miners mine one single block. Since the number of miners has increased considerably in recent years, more computing power is needed, which also increases the hash power.

Besides the obvious challenges it raises among miners, this difficulty has the benefit of securing the network since it’s almost impossible for hackers to gain enough computing power to face the total number of miners and their systems. At the same time, the mining difficulty ensures a steady mining rate, controlling the network better.

What’s the technology created by Luxor Technology?

In regard to this issue and the fact that people can’t even handle being in a mining pool, Luxor Technologies comes with the rolling-block high-tech that improves the constant block time, adjusting the previous changes by including block times in the preceding blocks.

The model uses a lot of data to provide an accurate forecast, from the price of Bitcoin, transaction fees, block subsidy, ASIC internal data, and operating cost distribution. Combining these elements allows the system to forecast the equilibrium hash rate, difficulty, and hash price for 18-month periods.

The rolling-block method provides essential data for Bitcoin miners, investors, and traders because they base their strategies on economic analysis and available data in other commodity markets to create reliable portfolios. Although this new system is quite unique, it can develop and support crypto enthusiasts in their development path.

How was network difficulty forecasted until now?

Before this new technique, Bitcoin mining difficulty was calculated as the ratio between the first block target and the actual target value (the highest value). Considering that the difficulty is automatically adjusted every two weeks or every 2016 block, this system might not be efficient anymore because networks and blockchains change often, and the current Bitcoin ecosystem is stable.

But mining difficulty can’t simply stay the same because the hash power wouldn’t be controlled anymore, and blocks would be mined much faster than they should, resulting in a flashing increase in blockchain size. Therefore, the purpose of mining difficulty is in regard to scalability measures, even though the downsides included have repercussions against miners.

The new strategy developed by Luxor Technologies aims to balance these two challenges and allow future miners and investors to have support to continue their activities. At the same time, the blockchain remains as stable as always.

Bitcoin miners are concerned by the aftermath of the crypto winter

Many Bitcoin miners stated they’re in distress due to the consequences of the crypto winter, as mining is no longer profitable, and even mining companies seem to struggle with the mining rate. Besides the fact that the mining difficulty increased as a result of more miners, factors like rising energy prices, inflation, and the expected recession affect the profitability of cryptocurrencies, but mostly Bitcoin since it’s the most used digital coin.

The problem is that the has rate is expected to drop when miners can’t cover their energy costs, affecting the network. As energy prices increased in the past months, mining one BTC used to cost $19,300 in November last year, which was feasible only for a limited number of miners. However, mining will become almost impossible if things continue in the same direction.

The low profitability in the Bitcoin mining sector affects the whole ecosystem because this activity is used to validate transactions to add new blocks to the blockchain and prevent fraud. And although new cryptocurrencies work without a mining system, Bitcoin wouldn’t be able to continue without it, which would put an end to the coin before its time.

Bitcoin miners are also stressed about the next halving in 2024, when mining requirements might increase, so miners might need to purchase more powerful microprocessors. If they aren’t able to withstand these aspects, miners will only increase their costs and the risks of production errors, hindering mining profit even more.

Until the market recovers, miners, investors, and validators need to be more cautious of new changes and developments that might affect or help them in the process. If they’re able to avoid risks and make a relatively decent profit, the blockchain can continue operating while providing security measures.

Bottom line

With the latest update from Luxor Technologies, the mining sector can improve, offering miners the chance to make profits without consuming too much energy or investing in expensive computational power. The new method of calculating the mining difficulty is a key component in the Bitcoin ecosystem.

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