Mining a Bitcoin block requires a certain amount of processing power – there is a series of mathematical calculations behind finding a new Bitcoin block and these are difficult to solve. So, Bitcoin difficulty refers to a specification on the Bitcoin blockchain that sets how difficult it is to do the calculations to find a single new block on the Bitcoin blockchain – and to receive the associated reward.
For Bitcoin, the mining difficulty is adjusted every 2016 blocks and the change is based on how long it took for the prior 2016 to get discovered. Currently finding a new block on Bitcoin’s blockchain takes about 10 minutes so 2016 blocks will take about 2 weeks to discover. This is because the creator of Bitcoin, Satoshi Nakamoto designed the Bitcoin network to exist out of exactly 21 million coins in total.
The net effect is that, if it takes longer than two weeks to find 2016 blocks, the mining difficulty for Bitcoin will be lowered. If 2016 blocks are found in less than two weeks the mining difficulty will, instead, be lifted to make it more difficult to solve for Bitcoin blocks.
Just like any other cryptocurrency, users mine Bitcoin for the rewards – and will only continue to do so if the reward exceeds the combined cost of electricity and mining equipment. As you can imagine, the difficulty of mining Bitcoin has a huge impact on how many people mine Bitcoin because this difficulty level impacts the power consumption of mining, and the equipment required to mine.
Difficulty implies that miners must select a device that offers the most mining profits while consuming the lowest amount of energy (which carries its own cost). The difficulty parameter also impacts how many Bitcoins are released into network.
Like we already said - Bitcoin mining difficulty will depend on how quickly Bitcoin has been mined in the recent past – which is influenced by the total hashrate of the entire network. Where the aggregate hashrate increases it implies that more people have been joining the Bitcoin network as miners. In turn, the additional computing power contributing to mining Bitcoin means the overall mining efforts have increased. Thus less time is spent to find a single Bitcoin block.
So – the higher the hashrate, the more coins are mined and the less time it takes for Bitcoin blocks to get solved – which means that the difficulty is increased as more miners join the network. On the other hand, if hashrates drop, it suggest fewer miners are contributing to the Bitcoin blockchain which in turn means less coins are mined – and Bitcoin difficulty will drop.
If you plan on mining Bitcoin you need to be aware of the hashrate of your equipment, alongside the power consumption on your mining rig. Also check what the current mining difficulty of Bitcoin is, and use this data to work out how much you will earn when mining Bitcoin.
Remember that Bitcoin is a coin that is incredibly popular – and more and more people are jumping on the Bitcoin bandwagon. As a result increasing numbers of miners are trying to mine Bitcoin, which in turn applies blocks are solved faster – and mining difficulty increases. So, there is a continuous rush for more and more powerful mining equipment.