What Is Bitcoin Mining Difficulty?

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No matter how you may feel about Bitcoin mining, there is no way to deny that it has greatly evolved since it was first created 10 years ago. Although the low-tech CPU and hardware were originally the norm, there is now a trend of miners moving towards ASIC miners as a means of increasing their return on investment. Moreover, investors are becoming increasingly curious about Bitcoin mining and its general potential to help diversify portfolios.

Making income by simply using hardware while remaining in the comfort of your own home obviously sounds like a promising premise. Nevertheless, it is not nearly as easy as it sounds. Given the recent massive influx of miners, the overall ease of Bitcoin mining has become vastly more difficult. Before we delve into the topic of mining difficulty let’s briefly overview Bitcoin mining, in general.

What is Bitcoin Mining?

Simply put, Bitcoin mining is a computer process used to verify and secure transactions made via Blockchain. This process involves adding new Bitcoin transactions to the existing Bitcoin public ledger after the transaction has been verified. The verification process can require multiple confirmations. Nevertheless, without the use of mining, the network is more prone to attacks, which can cause a loss of stability. In order for a transaction to get confirmed by miners, it must be added in a Block.

What is a Blockchain Block?

By attaching your Bitcoin mining hardware to generate hashes, you are helping to contribute to the overall Bitcoin network. In other words, by attaching your Bitcoin mining hardware to generate hashes, you are pooling your resources with other miners to find “blocks” on the network. These blocks include the data which contains various transactions that were made in these networks. Once miners have verified the block on the network, they are given new Bitcoins as a reward. While these rewards tend to fluctuate, the present reward is 12.5 Bitcoins. This reward is distributed equally among the participants.

While it may seem to make much more sense to go it alone to avoid splitting the rewards, there is no way to go solo unless you are willing to spend thousands of dollars in order to capture the global hash rate. Now that we better understand blockchain blocks, let’s find out more about Bitcoin mining difficulty.

What is Bitcoin Mining Difficulty?

Once a miner has connected his Bitcoin mining hardware, it adds to the overall mining difficulty of Bitcoin. Why does this happen? In short, as Bitcoin mining increases in popularity, investors tend to flock to connect their ASIC miners. This, in turn, boosts the competition to mine Bitcoins. In other words, Bitcoin difficulty is a term used to represent the number that regulates the time the miners take to add new blocks to the chain. From there, miners must run their hardware as a means of confirming and signing the transaction. Therefore, Bitcoin mining difficulty is the measurement of the projected time it takes to mine a new block.

What Causes Changes in Bitcoin Mining Difficulty?

Adjusted after ever 2016 blocks, the Bitcoin difficulty target is 256-bit generated hash number. Particularly, the adjustment is based on the amount of time used to mine the previous 2016 blocks within a given network. In general, the difficulty algorithm serves to produce Blocks approximately every ten minutes. The time is then modified every two weeks in relation to the amount of time it spent on mining the previous 2016 blocks. Therefore, the Bitcoin mining difficulty is lowered when the previous 2016 blocks takes more than two weeks to mine and it is elevated when it takes less than that.  And typically, the block creation rate will decrease as more miners join.

The Fluctuation of Bitcoin Difficulty

While it may be a bit of a nuisance,  it seems to be a necessary evil. If the mining difficulty remained steady it would have been much easier for everyone to amass an abundance of Bitcoins. This is due to the fact that the steady difficult rates would have caused miners to rush to buy and use their ASIC miners. This would cause the hash rate of the entire mining network to increase, which would ultimately lead to a decrease in block generation.

In recent months, Bitcoin prices have been adversely affected in a major way. The mining difficulty has been drastically reduced due to the fact that mining has not been profitable. The more miners who decided to quit the business has caused an overall reduction in competition. Of course, this has lowered the difficulty for the vast majority of miners. However, when Bitcoin price was at its peak, the mining difficulty was also at its height. Nevertheless, despite the fact that the present market price of one Bitcoin has lowered, the difficulty and hash rate is still higher than it has been in previous years.

Either way, if you manage to access a cheap power source and purchase cost-effective hardware, you will be able to fully take advantage of the present predicament.

Although the overall profitability of Bitcoin mining has declined, it can still be lucrative to those who know how to leverage the present situation in their favor. If you need more Bitcoin mining tips, feel free to contact the experts here at D-Central Tech.


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Disclaimer: The information provided on this blog is for informational purposes only and should not be taken as any form of advice.

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