What Is Mining Difficulty?
Bitcoin miningWhat Is Bitcoin Mining? Bitcoin mining is the process of using specialized computers called bitcoin miners to systematically guess a number that completes a math equation. Whoever finds the number... difficulty is how much computational power is required for bitcoin miners to mine the next block. As more miners join the network, the difficulty goes up because there is now more hashpower competing for the same number of bitcoin blocks.
To compensate for this, the Bitcoin network adjusts the difficulty every 2016 blocks so that it takes about 10 minutes to mine a block no matter how many miners are trying to do so.
Difficulty Adjustment
The difficulty of mining a bitcoin block depends on how powerful the computers used to mine bitcoins are. The network makes sure that blocks are mined roughly every ten minutes by making the difficulty of mining harder or easier, depending on how many blocks have been mined in the past two weeks. This is called retargeting, and it happens every 2016 blocks, or every two weeks. The 2016 blocks before a retargeting period are used to calculate how many blocks were mined on average in that period. If this number is more than 2016 blocks, the difficulty is increased; if it is less than 2016 blocks, the difficulty is decreased. The goal of the difficulty adjustment is to make sure that the hard-capped supply of 21,000,000 bitcoin are not mined too quickly and that the rate of inflation stays consistent.
Why Does Difficulty Matter?
Mining difficulty matters for a number of reasons. Firstly, difficulty determines how much computational power is needed to find the next block. Secondly, difficulty determines how long it takes on average to mine a block and thus how fast new bitcoins are introduced into the system. Finally, difficulty affects how much bitcoin miners are paid for their efforts. If difficulty is low, miners will be paid more for mining because it is easier to find blocks; if difficulty is high, miners will be paid less because it is harder to find blocks.
In the early days of Bitcoin, anyone with a computer could mine for bitcoins and earn a profit. As more and more people started mining, the difficulty of finding new blocks increased and it became more and more difficult to make a profit. This is why miners now use specialized equipment that is specifically designed for mining bitcoins.