Why Bitcoin's growing pains are exactly what it needs

5 May 2025

Bitcoin breaking free of traditional finance gravity is supposed to be hard, but Donald Trump trying to hitch a ride on the crypto rocket to the moon is adding unnecessary drag.

If you go back to the founding principles — which is totally on libertarian trend, BTW — Satoshi Nakamoto always meant for Bitcoin to be hard to come by.

“To compensate for increasing hardware speed and varying interest in running nodes over time, the proof-of-work difficulty is determined by a moving average targeting an average number of blocks per hour,” Nakamoto wrote in the cryptocurrency founding texts. “If they’re generated too fast, the difficulty increases.”

Nakamoto didn’t just invent a digital currency — he designed an economic game of chess with physics. Bitcoin’s proof-of-work system requires miners to solve computational puzzles to add new blocks to the chain. As Nakamoto wrote, “the proof-of-work also solves the problem of determining representation in majority decision making”, essentially making computing power (and electricity costs) — not central bank decree — the backbone of consensus.

Despite the current market panic about the mass miner exit, one truth remains: every 2,016 blocks, the network assesses how quickly miners are working. If blocks are being mined faster than the 10-minute target, the system ramps up the difficulty. This adaptive model ensures that as more miners enter the arena — or as machines get faster — the Bitcoin protocol doesn’t flood the market with new coins. In other words, scarcity is coded into its DNA.

More power

Picture this: late in 2024, the total computing power dedicated by miners worldwide to running the Bitcoin network (what is known as the “hashrate”) surged dramatically. It hit levels around 785 EH/s — that’s a truly massive amount of processing power equating to a quintillion (Exa) hash attempts being made across the entire Bitcoin network every single second, and a jump of nearly 50% from the end of 2023.

Bitcoin’s difficulty — basically, how hard the system makes the cryptographic puzzle that miners need to solve to add blocks to the chain — automatically increased right alongside the hashrate. It didn’t break; it scaled up exactly as designed.

This isn’t a bug; it’s a core feature ensuring new Bitcoin is created at a steady, predictable pace, preventing a flood of new coins just because more computers are trying to mine them. It’s a way of keeping the supply controlled and predictable, just like when OPEC+ decides to decrease oil production to stabilise the barrel price.

Energy is the price of trustless money

There is, however, a real-world miner exodus driven by power. Bitcoin miners were burning 19.6GW globally in early 2024, up from 12.1GW a year prior. The Russia-Ukraine war and Trump-era tariff instability have driven up electricity prices across markets, further compounding mining costs.

According to the CoinShares blog that caused the current panic, it now costs about 40% more than the value of Bitcoin to mine it.

That might sound like an environmental catastrophe. But viewed through a macroeconomic lens, it’s a feature, not a flaw. Just like gold mining consumes resources to mine and mint coins that hold their value, Bitcoin relies on energy to validate transactions and secure the network. Without cost, there’s no skin in the game. Without skin in the game, there’s no trustless consensus.

The result is a digital asset with a built-in economic stability mechanism, and the added benefit of no labour disputes that could drive up the cost of production (looking at you, gold). No central bank adjusts Bitcoin’s difficulty — it happens automatically through consensus among network participants. This makes Bitcoin uniquely resistant to manipulation by any single entity, whether corporate or governmental.

The Trump card

Here’s where it gets murky. A recent push in the US to create a sovereign wealth fund backed partly by a crypto reserve has spooked Bitcoin purists. Why? Because it threatens to turn the decentralised ethos of digital currency on its head.

Although a Trump executive order explicitly avoided buying Bitcoin directly, an old legislative zombie — the Bitcoin Act — could change that. If passed, it would allow the US Treasury to revalue its gold holdings and use that accounting manoeuvre to acquire one million bitcoins — all without technically increasing the national debt.

It’s a clever bit of accounting that is also potentially catastrophic.

If the US government becomes the biggest whale in Bitcoin, it shifts the narrative from “freedom from fiat” to “crypto co-opted by the state”. Bitcoin’s original appeal — a hedge against central banks, inflation, and institutional overreach — loses its punch if the same institutions become its majority stakeholders.

What this means for you:

Here’s the takeaway for local hodlers (holding-on-for-dear-lifers) and miners:

Bitcoin’s increasing mining difficulty is good for long-term value.

Energy costs are up, but South Africa’s renewable potential is a sleeper advantage.

The US government’s potential entry into large-scale Bitcoin ownership is a threat to decentralisation — not a bullish stamp of approval.

Dollar-backed stablecoins are not a safe reserve — they’re a derivative of fiat, not a replacement.

In the era of weaponised monetary policy, surveillance banking, and digital ID creep, Bitcoin still stands alone as a decentralised, global, censorship-resistant form of money.

The stability paradox

Layered on top of this Bitcoin play is a sovereign wealth fund proposal to back the US dollar with dollar-based stablecoins — a concept that creates a circular economic problem: you’re backing fiat currency with an IOU of the same currency — a financial ouroboros that eats its own credibility.

Reserve stablecoins like USDT and USDC may function as digital dollars, but they introduce counterparty risk and centralisation — the very problems Bitcoin was designed to escape. If the US uses stablecoins to shore up its monetary policy, it’s a house of cards propped up by another house of cards.

Digital uncertainty

Trump’s flawed economic model is why many cryptocurrency advocates favour Bitcoin’s transparent, self-regulating difficulty mechanism over stablecoins for long-term value preservation. All the US president’s crypto moves have been varying shades of grifts, but these dollar-based stablecoins derive their value entirely from the dollar itself, creating no independent value, just a shell game that increases systemic risk rather than reducing it.

What remains clear is that Satoshi Nakamoto was not just creating a digital currency, but designing an economic system with built-in stability mechanisms that operate independently of human intervention. Whether this design can withstand the weight of government interest may prove to be Bitcoin’s ultimate test. DM

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