Thread by Drew Armstrong

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1/3 of the way thru this epoch, the next difficulty adjustment is estimated to be -11%. Typically, individual difficulty adjustments aren't very important, but with so many miners hanging on by a thread, the present moment is different

Some thoughts on the near term outlook:

1/
Most hosting contracts require monthly prepayments. This is likely the reason there wasn’t an immediate drop in hash rate after #bitcoin fell thru $16k. On Nov 1 when the last prepayment was due, hash price was still north of 7 cents (if only just)

2/
But now, @ 5.9 cent hash price, things are different; S19J Pros are unprofitable @ anything above than 8.2 cents / kWh. The cost curve remains elusive, but many hosting contracts are 8-9 cents / kWh or higher. So we should expect to see more EH/s fall off the network on Dec 1

3/
That said, some marginally unprofitable miners might attempt to stay the course, in anticipation of the difficulty adjustment & other hash rate falling off the network. After all miners are some of the most bullish actors in #Bitcoin

4/
For these miners, the temporary losses can be viewed as a call option on hash price (and it is far easier to unplug machines than to deploy them). But it is unclear how many miners have the luxury of playing this game of chicken

5/
Conclusions:
- I expect to see network hash rate continue to decline in the next week or two
- This episode is another reminder that in the real world, cash flows are discrete, not continuous. In troubled times, the timing of these matters



6/
- This is all good for #Bitcoin. The friction of plugging in / unplugging miners is a key part of what makes PoW so secure during price volatility. PoS has no such friction, so if a token tanks, it becomes far cheaper to attack the network

7/7
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