As expected, the second drop in Bitcoin’s difficulty occurred after the halving of May 11th.
Before the halving, the difficulty was 16.1T, which was reduced to 15.1T on May 20th. Now, after the new reduction, it has fallen below 14T.
Overall this is a reduction of more than 13% from the pre-halving values, and the drop seems to be over. In fact, an increase is expected for the next variation.
The reduction of the post-halving difficulty has been so significant that at this moment, for example, the block time has fallen below 9 minutes.
After the halving, the block time had increased significantly, remaining for several days around 12 minutes, with a peak of over 14 minutes.
The average block time should always be more or less around 10 minutes, and the changes in difficulty, which occur every two weeks or so, serve to keep it as close as possible to 10 minutes.
After the halving, which cut the miners’ reward in half, the hashrate dropped, making the block time increase. With fewer validated blocks per day, the number of confirmed transactions fell, bringing the cost of these transactions to very high levels.
But already after the first difficulty drop, which made mining easier, the hashrate was back up again, decreasing block time and fees.
With this last significant reduction in difficulty, the hashrate will increase again, further reducing the block time and the cost of transactions. In fact, it is possible that the hashrate will grow significantly, and the reduction in block time will be excessive, which means that the next difficulty adjustment, expected in about 13 days, should see the block time return to around 10 minutes.
In the meantime, average transaction fees have dropped, but still remain above $1 (or more than 0.0001 BTC).
During the 13 days between now and the next difficulty adjustment, fees may fall further, especially if the hashrate in these days increases significantly, although it is plausible that they will rise again after the next difficulty adjustment.
It is worth remembering though, that there are already alternatives to BTC’s on-chain transactions that can reduce their costs.
Since it is inconceivable that a short-term change in the Bitcoin protocol could generate a reduction in on-chain fees, for example by increasing the maximum block size from 1MB to 2MB, the only possible solutions are off-chain, or on other chains.
The main off-chain solution is Lightning Network, while the main cross-chain solution is pTokens, an ERC20 token collateralized in BTC but running on the Ethereum blockchain.
