Over the past few days, multiple users on Twitter have noted a decline in the Bitcoin user experience. Transaction fees have increased from an average of $1-3 toward $7 and beyond.
This is the result of a drop in the Bitcoin network hash rate. The hash rate is the metric used to measure how much computational power is being used to mine Bitcoin blocks, thus enabling transactions.
Casa co-founder and BTC Times editorial board member Jameson Lopp noted that per his data, the hash rate has dropped 45% over three days leading up to October 27th.
This is potentially a byproduct of the rainy season in China coming to an end. From approximately July to September, Bitcoin mining becomes cheap in China as hydroelectric dams are incentivized to sell the electricity they generate for almost no cost at all.
Once the rainy season ends, it is said that miners relocate their machines and facilities to Western provinces in China where electricity can be cheaper outside of the rainy season.
The drop in the Bitcoin hash rate is not as severe considering the seven-day moving average, which currently sits at 122 exahashes per second as per BitInfoCharts. At the highs last week, this moving average peaked just shy of 150 exahashes per second.
The hash rate drop was compounded by the fact that on October 18th, the mining difficulty of the Bitcoin network also hit a new all-time high. As the BTC Times reported then, the difficulty neared 20 trillion after a 3.62% gain. The mining difficulty describes the algorithmic difficulty that miners have in finding a block. The difficulty is dynamically adjusted to ensure that each Bitcoin block takes around ten minutes to mine.
At press time, the hash rate has begun to recover above 100 exahashes per second.
Mempool Space, a webpage that tracks the state of the Bitcoin mempool, argues that the recent volatility in the hash rate and its effect on the user experience indicate a need for layer two technologies:
Development on the front of layer two solutions has been heating up in recent months.
In August, the BTC Times reported that Lightning Labs, a Bitcoin company backed by Twitter founder Jack Dorsey and Robinhood co-founder Vlad Tenev, released lnd 0.11-beta to enable bigger Lightning channels.
Shortly after that, Lightning-based derivatives platform LN Markets closed a pre-seed funding round to launch financial instruments such as options and futures on the Lightning Network.