How Can a Large, Sudden Drop in Hash Rate Lead to a Temporary Mining ‘Windfall’?
If a large number of miners suddenly go offline, the network hash rate drops significantly. However, the difficulty adjustment only occurs after 2,016 blocks.
In the period before the adjustment, the difficulty remains high while the competition is low. This means the remaining miners have a much higher probability of finding a block at the current, high reward rate, leading to a temporary increase in their individual profitability, or a 'windfall'.
Glossar
Temporary Increase
Impulse ⎊ A temporary increase, within cryptocurrency and derivatives markets, often manifests as a short-lived deviation from established price trajectories, frequently triggered by order flow imbalances or news events.
Low Hash Rate
Security ⎊ A low hash rate within a cryptocurrency network directly correlates to increased vulnerability to attacks, particularly a 51% attack where a malicious actor could control the blockchain.
Network Hash Rate
Security ⎊ Network hash rate represents the computational power dedicated to a proof-of-work blockchain, directly influencing the cost and feasibility of malicious attacks.
Hash Rate
Power ⎊ Hash rate quantifies the total computational power dedicated to solving the cryptographic puzzle in a Proof-of-Work network.