1. Increase in the Hashrate of the Entire Network

As more and more people participate in mining, the hashrate of the entire blockchain network (that is, the hashrate of the whole network) will continue to increase. This means that the proportion of hashrate occupied by a single miner in the network becomes smaller, resulting in an increase in the mining difficulty for each miner and a reduced chance of mining a block. Therefore, even if the miner's equipment remains unchanged, their earnings will gradually decrease as the hashrate of the entire network grows.

2. Increase in Mining Difficulty

The blockchain network has designed a mechanism for dynamically adjusting the difficulty to ensure that the generation speed of new blocks remains stable. As the hashrate of the entire network increases, the mining difficulty will automatically increase. As a result, even if the miner's hashrate remains unchanged, the time it takes for them to complete block calculations will become longer, which in turn leads to a reduction in rewards. This is the direct cause of the decline in miners' earnings.

Taking Kaspa as an example, here are some specific situations:

The Halving Mechanism of Kaspa

The design of the block rewards and total supply of Kaspa is a very crucial factor. Its total supply is 28.7 billion KAS (the native token of Kaspa). And the issuance schedule of Kaspa adopts a halving mechanism similar to that of Bitcoin, that is, it halves every six months, and the monthly rewards gradually decrease.

Moreover, the speed at which the rewards of Kaspa decrease is not a linear change but is adjusted according to a smoothly decreasing formula. The monthly reward reduction rate is:

(1/2)^(1/12)

This formula means that the block rewards will gradually decrease over time, and this process is smooth rather than a one-time halving.