Category Archives: difficulty

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Bitcoin Mining Difficulty Sees Sharpest Decline in 7 Years

Bitcoin mining difficulty was adjusted downwards 15.13% on 3 December 2018, the sharpest percentage decrease in difficulty since November 2011, and by far the biggest downward adjustment in difficulty by magnitude. This follows a 7.39% downward adjustment on 16 November.

Overall, Bitcoin’s mining difficulty has fallen from 7.45 trillion in early October to 5.65 trillion currently. This has coincided with a decrease in Bitcoin’s hash rate from a record high of 62 EH/s to 32 EH/s as of 2 December. This implicitly suggests that 30 EH/s of Bitcoin’s mining hash rate, which represents billions of US dollars of mining equipment, has been turned off due to no longer being profitable. The driving force behind this is the fall in Bitcoin’s price from USD 6,500 to the USD 3,500-4,000 level during the latter half of November 2018.

The Bitcoin mining difficulty adjusts every 2,016 blocks, which is roughly every two weeks, in order to maintain Bitcoin’s block time at 600 seconds. This is because if Bitcoin’s hash rate rises, then block times become shorter at constant difficulty, and if Bitcoin’s hash rate decreases then block times become longer. Indeed, Bitcoin’s block time had risen to 700 seconds before the most recent difficulty adjustment took effect, so the Bitcoin network was much slower than usual this past week. Without difficulty adjustments, the total supply of 21 million Bitcoins would have been mined already, which would have led to strong downward pressure on Bitcoin’s price, as well as a quick end to the Bitcoin mining industry as we know it. Further, this would lead to the Bitcoin network being much less secure, which is unacceptable, and a primary reason as to why periodic mining difficulty adjustments are essential.

The downward difficulty adjustment is actually good news for Bitcoin miners that are still mining, since the 20% decrease in mining difficulty over the past month directly correlates to a 20% increase in Bitcoin mining revenues per unit of hash rate. Increases in mining profits will likely be short-lived, however, since a significant fraction of that 30 EH/s of rigs which have been shut off due to lack of profitably will likely be turned on again.

Logically, the 20% increase in Bitcoin mining profits per unit of hash rate is a good environment for new miners to enter the game, but the abundance of mining rigs in the world that are sitting idle will probably beat new miners to the punch.

 

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Bitcoin Mining Difficulty Undergoes Biggest Jump in History

Bitcoin mining difficulty increased by 634 billion units on 5 June 2018, from 4.306 to 4.940 trillion units. This is the largest difficulty increase in history, and comes at a time when Bitcoin’s mining hash rate is rapidly accelerating. In the past year Bitcoin mining difficulty and hash rate has increased 728%. 

This latest difficulty adjustment represents an increase of 14.71%, the largest increase since January 2018 when the cryptocurrency markets were in a frenzy as Bitcoin hit all-time highs near USD 20,000. There were several difficulty adjustments in excess of 15% during the Bitcoin rally, but the magnitude of the 5 June 2018 increase far exceeds any other difficulty increase on record.

Mining difficulty is a measure of how many cryptographic hash calculations it takes to solve a block, and it updates every 2,016 blocks, which is almost exactly two weeks. The reason mining difficulty updates is to maintain a consistent block time of 10 minutes, which is the time it takes for the Bitcoin network to cryptographically hash the latest transactions into a block. The block time is equivalent to transaction confirmation time.

As mining hash rate on the Bitcoin network increases, the time it takes to find a block decreases, assuming difficulty is constant. For example, the block time had sharply declined to less than nine minutes before the latest difficulty adjustment. Once the automatic difficulty adjustment occurred, the block time went back to 10 minutes. Without the adjustments, block time would decrease to zero, which would be great for miners, but would cause rapid inflation of the Bitcoin supply, hurting its value relative to USD.

Hash rate has been skyrocketing, increasing from 30.83 to 35.37 exahash/s (1 exahash = 1 billion gigahash) over a two-week period between the last two difficulty updates. In the couple of days since the difficulty update, the hash rate has increased further to 37.25 exahash/s. This represents a tremendous amount of mining power joining the Bitcoin network.

 

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