Bitcoin Difficulty Explained

What is it bitcoin difficulty?

Bitcoin difficulty is a blockchain network parameter that shows how difficult it is to execute the mathematical calculation for new block finding and to get a reward for it.

How often does Bitcoin difficulty adjust?

The difficulty is changed every 2016 blocks based on the time it took to discover the previous 2016 blocks. The time to find a new block on the Bitcoin network is approximately 10 minutes (as Satoshi Nakamoto initially planned the 21 million coins emission), therefore to find 2016 blocks will take exactly 2 weeks. If 2016 blocks were found in more than 2 weeks the mining difficulty will be lowered, if 2016 blocks were found faster then that the difficulty will be raised.

Why was the bitcoin difficulty parameter introduced?

Mining Bitcoin, like many other cryptocurrencies, is profitable as long as the cost of mined coins exceeds the cost of equipment and electricity. The Bitcoin difficulty indicator has great importance for mining, as it determines, how much equipment and power is needed. Difficulty helps miners to determine the most energy-efficient devices that provide the best return. Also, due to this mining parameter, the rate of new coins is controlled.

Bitcoin Block Generation Time vs Difficulty

bitcoin difficulty explained

*Image was taken from bitcoinwisdom

Why does Bitcoin difficulty increase?

The Bitcoin difficulty indicator depends on the hash of the network and the time, which was spent on previous blocks finding. In case of hash rate indicator has increased, it means that new participants have joined the Bitcoin mining. They connected their equipment to the network, so the computing power of the network was increased. Therefore, it takes less time to find a block than with a lower hash rate.

The algorithm of the difficulty calculating is the following:

– The higher the hash rate, the more miners are involved in mining coins, the less time they need to find blocks – the difficulty increases;

– The lower the hash rate, the fewer miners, the more time spent on mining – Bitcoin difficulty decreases.

Hashrate units of measure are expressed as follows:

– Hash / sec (H / s);
– Kiloches / s (KH / s);
– Megaches / sec (MH / s);
– Gigaches / sec (GH / s);
– Terahesh / s (TH / s);
– Petahesh / s (PH / s);
– Exahesh / sec (EH / s)

Those, who plan to engage in mining, should study information about the power of a particular device, to be sure in choosing the most optimal and cost-effective equipment.

In conclusion, please, do not forget that Bitcoin cryptocurrency is popular itself: the more popular it is, the more miners are interested in its extraction all over the world. They connect their computing power to the network, increasing its hash rate as well as the Bitcoin difficulty.

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