Bitcoin Mining Difficulty Overview

The Bitcoin mining difficulty is a measure of how hard it is to mine blocks on the network right now. The network is less complicated when there are fewer machines connected to it, and vice versa.

What Does Bitcoin Mining Difficulty Mean?

Difficulty shows how hard it is to figure out the hash sum and how many calculations are needed. Every 2016 blocks, or about every two weeks, the difficulty of Bitcoin is recalculated by looking at how long it took to mine the previous 2016 blocks. The goal of the change is to keep the amount of time it takes to create a block at about 10 minutes. This time is different for other cryptocurrencies. For example, Ethereum takes 12 seconds, and Litecoin takes 2.5 minutes.

The amount of computing power on the network can change a lot over time. When Satoshi Nakamoto took out the first bitcoin, there was only one computer or laptop in the network. Today, cryptocurrency mining is done on an industrial scale by whole farms.

The global block mining difficulty is used by the Bitcoin network. The hash of a valid block must be lower than a certain target. Also, different mining pools set their own limits on how hard it is to mine.

What is the purpose of difficulty?

To keep the process of making new blocks stable, the software should automatically make it harder or easier for miners to find the hash. Thanks to the changes, the system stays stable: no matter how many devices are in the blockchain network, the calculations will still take about 10 minutes.

The difficulty of mining cryptocurrency is a very important factor that anyone who is just starting out should think about. The coin is less valuable as more miners join the network and more blocks are added. So, the first miners to start working in the industry were able to make money quickly. But even those who come later must be sure that the extraction will bring them more money.

Changing Levels of Difficulty

In the Bitcoin network, the difficulty of mining can keep going up until the last coin is mined. At the same time, the rate at which complexity can grow can also grow. The difficulty of mining coins in the Bitcoin network has gotten so high that making a new coin now takes a long time and a lot of very powerful equipment. This is a big deal for a lot of miners, because not everyone can buy such expensive equipment or upgrade their old one.

Also, in theory, the difficulty can go down if the system sees that blocks are being mined too quickly. In real life, this almost never happens. Since 2015, there have only been five times when this has happened. There is a steady rise in how hard things are to understand.

What affects Difficulty?

There are three main things that affect how hard it is to mine Bitcoin:

• The number of people and devices that are part of the network.
• The existence of a global block complexity, which depends on finding a valid hash below a certain level.
• The mining pool is in charge of setting the mining speed.

How do the difficulty of mining, the price of Bitcoin, and how profitable mining is relate to each other?

How profitable mining is depends on many things, such as how hard it is to do (periodic reward reduction).

The miner who was able to add a new block to the network is given cryptocurrency as a reward. People think that 10 minutes is enough time for each participant’s equipment to check all of the transactions in the block.

The miner who found the block last gets the reward, so they work together in groups. The group has a much better chance of finding the block last.

At the moment, the world mines 12.5 Bitcoins every 10 minutes. In 2020, this number will drop to 6.25 BTC. At the same time, cryptocurrency is becoming more and more popular, and more and more people are coming to mining pools. And the 12.5 coins are split between hundreds of thousands of people, which means that each miner’s income goes down. So, miners have to keep making their tools stronger so they can make at least a little bit of money. But it’s hard to do it all the time.

It’s enough to look at the graphs of how the difficulty changes and remember that the number of miners connected to the network will always have an effect on how profitable the process is.

There are three main ideas about what causes the correlation:

• As more and more miners try to get paid, the price and difficulty both go up.
• On the other hand, the price depends on how hard it is and how fast it works.
• A power law shows how the indicators are linked to each other. If you keep track of this ratio, you can figure out a way to figure out the BTC rate.

No one knows which theory is right, but many miners and investors are already paying attention to this fact so they can make the right decisions.

Conclusion

The technological factor is closely linked to how hard it is to mine. Miners want to bring new, high-performance equipment to the market, and they also want to lower the cost of electricity as much as possible by finding free outlets or putting farms in areas with low electricity costs.

So long as people are mining, the difficulty will keep going up. Because of this, the process will become less profitable, home mining will become a thing of the past, and people who are interested will go to exchanges or start mining altcoins. And Bitcoin mining will continue to be controlled by big companies that have the money and space to set up a lot of equipment.