Bitcoin mining has greatly evolved since its inception back in 2010. From low tech CPU and hardware, miners are now flocking towards ASIC miners (See here: Best ASIC Miners) to increase their return on investment. Investors are more curious about Bitcoin mining and its feasibility to diversify their portfolios.
Of course, making income from firing up your hardware while sitting at home sounds great. But it is not as easy as it sounds (See here: 5 Steps to Always Make Money Bitcoin Mining). A large influx of miners in recent months have rapidly increased Bitcoin mining difficulty. But before we talk about mining difficulty let us, have a brief overview of Bitcoin mining.
What is Bitcoin Mining?
Bitcoin mining is a computer process to verify and secure the transactions on Blockchain (See here: What is Bitcoin Mining Actually Doing?). It involves adding new Bitcoin transactions in the already existing Bitcoin public ledger after verification of transaction. Verification can require multiple confirmations. Without-mining, the network can easily get attacked and lose stability. For a transaction to get confirmed by miners, it needs to get added in a Block.
What is a Blockchain Block?
When you attach your Bitcoin mining hardware to generate hashes, you are contributing to the overall Bitcoin network. This means you are pooling your resources with other miners to find “blocks” on the network. The Block is the data containing various transactions in these networks. When the miners verify the block on the network, they are rewarded with new Bitcoins. The reward is 12.5 Bitcoins as at the time of this post. This is then distributed among the participants.
I know. You’re thinking ‘why do I even need to to connect my Bitcoin mining hardware to a pool’ (See here: Best Bitcoin Mining Pools)? You want use your resources instead for solo mining and get that shiny 12.5 Bitcoin reward all for yourself. But sorry to pop your thought, evil genius, you honestly can’t go solo these days unless you are willing to spend thousands of dollars to capture the global hashrate.
With that said, let’s now proceed to our main topic.
What is Bitcoin Mining Difficulty?
When a miner connects his Bitcoin mining hardware (See here: Best Bitcoin Mining Hardware for 2019), it adds to the global Bitcoin mining difficulty. But what is this difficulty and why it constantly changes?
Data from Blockchain shows how mining difficulty has changed during the last five years. As Bitcoin mining popular more and more popular, investors are flocking in to connect their ASIC miners, which increases the competition to mine Bitcoins.
Bitcoin difficulty is the number that regulates the time the miners would take to add new blocks in Blockchain. When you relay a transaction to Bitcoin network, it doesn’t just go through it. Miners also need to run their hardware to confirm and sign the transaction. If multiple blocks fail to get confirmation on the Blockchain, it will start to clog the Bitcoin network and this, in turn, will likely increase the average transaction fees.
Thus the Bitcoin mining difficulty is the measurement of the time it would take to mine a new block.
What Causes Bitcoin Mining Difficulty to Change?
Bitcoin difficulty target is 256-bit generated hash number that is adjusted after every 2016 blocks. The adjustment is based on the time it took to mine the previous 2016 blocks in the network. The difficulty algorithm works in a way that produces Blocks roughly every ten minutes. The time is modified by Bitcoin-QT client after every two weeks in relation to the time it took to mine previous 2016 blocks.
The Bitcoin mining difficulty comes down if the earlier 2016 blocks took more than two weeks to mine and vice versa. We can say that when more miners join, the block creation rate will decrease. This is because there will be more dedicated Bitcoin mining hardware working to solve the hashes.
When the block creation time goes down, the Bitcoin mining difficulty increases in order to compensate the miners. We can say that Bitcoin difficulty and the Block time creation are inversely proportional. When one increases the other decreases!
All calculations aside, Bitcoin mining difficulty constantly needs to change to keep the time at par with 10 minutes. But well, why 10 minutes? I wish I can have an answer to this, but Satoshi Nakamoto made it this way! So maybe we just accept it? Let’s assume that Satoshi did some complex mathematical solutions to reach this number.
Will the Bitcoin Mining Difficulty Ever Stop Changing?
If the difficulty was always constant, we might have mined all 21 Million Bitcoins up till now.
This is because miners would have rushed to buy and deploy their ASIC miners. In turn, the hashrate of the entire Bitcoin mining network would increase leading to a decrease in block generation. Perhaps, a block would start to generate in less than a minute if the difficulty remains constant. Or Imagine 12.5 Bitcoin getting minted in less than a minute. If that were the case, You won’t be watching the Bitcoin hovering at current price levels!
The Current Scenario
Bitcoin mining difficulty keeps changing as the hashrate fluctuates. This can bring several profitable opportunities for investors. If you can spot the perfect time to switch on your hardware, you are on the path to become the next Bitcoin millionaire!
Lately, Bitcoin price have taken a hard hit. It went on a long bear run from $20000 to bottoming out around $3100. But this might be great news for new miners and investors looking to start with Bitcoin mining. The Bitcoin mining difficulty has greatly reduced because of the unprofitability, as many miners thrown in the towel, reducing competition.
This, in turn, has lowered the difficulty for many of us. While Bitcoin price was hovering around $20000 the mining difficulty was the highest ever recorded. Although, the current market price of one Bitcoin has lowered, the difficulty and hashrate is still higher in comparison to previous years.
But the technicalities asides, if you have access to cheap power source and you have purchased low-cost hardware from our store, you already have a leverage in the current scenario.
Although, the Bitcoin mining profitability have declined in relation too today’s price, but it still remains lucrative. You can also read as to how much you can make from different types of ASIC miner on our blog.
While the profits might seem low but if you are firm believer in decentralized Cryptocurrencies and are optimistic about the financial freedom that Bitcoin offers, then stashing up your rewards would be the best way forward.
In addition, it is a perfect time to buy ASIC hardware available in our store (See here: MiningStore Shop). Miners shutting their hardware due to unprofitability and increased electricity costs are flooding the market with used Bitcoin mining hardware. (See here: How to Mine Bitcoin)
How about getting a Bitmain Antminer S9 for a start? The price of this unit have decline from $5000 to just $200, all thanks to the bear market!