Bitcoin Mining Difficulty: an overview, how to find out and calculate, difficulty charts, influence on the course
The difficulty of mining Bitcoin is an indicator that reflects how difficult it is at the moment to compete for mining blocks on the network. The fewer machines are connected to the network, the lower the difficulty, and vice versa.
Difficulty growth dynamics (as of September 1, 2019, the average Bitcoin Difficulty is 10,771,996,663,680.01428571):
Current difficulty and graphs
Difficulty levels are constantly changing. Here are some relevant ways to find out at what level a parameter is at the current moment:
✅ https://www.blockchain.com/ru/charts/difficulty. Bitcoin mining difficulty chart for the entire existence of the blockchain network (you can select the period).
✅ https://www.coinwarz.com/difficulty-charts/bitcoin-difficulty-chart. Graph and table with daily averages. The statistics of the Bitcoin Difficulty value change for the day are presented; 30, 60 and 90 days.
✅ http://bitcoin.sipa.be/ – Multiple charts showing the current and projected difficulty of the BTC network.
✅ https://bitcoinwisdom.com/bitcoin/difficulty – Bitcoin hashrate and difficulty information, comparative charts.
✅ https://diff.cryptothis.com/ is another detailed and visual site that updates information in real time.
✅ In the console of the Bitcoin wallet Bitcoin Core, enter the getdifficulty or getmininginfo commands:
Nuance: in order to find out the current value in this way, the blockchain network must be fully loaded (synchronized 100%).
What is the difficulty of Bitcoin mining
Complexity shows how difficult it is to find a hash sum, how time-consuming calculations are needed for this. The difficulty of Bitcoin is recalculated every 2016 blocks (approximately every two weeks), while the time spent on mining the previous 2016 blocks is analyzed. The purpose of the adjustment is to keep approximately the same computation time to create a block – 10 minutes. Other cryptocurrencies have a different time, for example, Ethereum has 12 seconds, and Litecoin has 2.5 minutes.
The amount of computing power in the network can change significantly over time – at the time of the mining of the very first BTC Satoshi Nakamoto, it was just one computer or laptop. And today, whole farms of industrial scale are engaged in cryptocurrency mining.
The Bitcoin network takes advantage of the global block mining difficulty. Correct blocks must have a hash below a specific target. Also, various mining pools themselves set the lower limit of the difficulty.
The formula by which the indicator is calculated:
difficulty = difficulty_1_target / current_target
• current_target is always 256bit
• difficulty_1_target – in the classical sense, a number in which the leading 32 bit = 0, and the rest 1. The parameter is also called the pool difficulty and may differ slightly depending on how difficulty is measured.
The Bitcoin protocol uses a custom limited precision floating point number type. For this reason, miners often approach the complexity based on this, for this there is a concept – bdiff.
What is complexity for
The software should automatically make searching for the hash more or less difficult for miners to ensure the stability of generating new blocks. Thanks to adjustments, the system remains stable: no matter how many devices there are in the blockchain network, the calculations will still take about 10 minutes.
The difficulty of mining cryptocurrency is a very important indicator that any beginner should take into account. The more miners and new blocks in the network, the less profitable the coin becomes. Therefore, the miners who came to the industry first were able to get tangible profits in a short time. But those who come later should be sure that the extraction will bring them additional income.
How difficulty changes
The difficulty of mining within the Bitcoin network can increase indefinitely until the very last coin is mined. At the same time, the rate of increase in difficulty can also increase. To date, the level of difficulty of mining coins in the Bitcoin network has risen to such a level that the production of each new coin takes a lot of time and this requires very powerful equipment. For many miners, this is a critical factor: not everyone has the opportunity to purchase such expensive equipment or upgrade an old one.
Also, in theory, the complexity can decrease if the system sees that the blocks are being mined too quickly. In practice, this almost never happens – since 2015, this situation has developed only five times. There is a steady upward trend in complexity.
In June 2019, according to Blockchain.com, the figure reached 7,868,124,124,773, a new record since the fall of 2018. The hash rate was 56,000,000 Tx / s, which is slightly lower than the previous values. Thus, the network has become more secure than ever, but the competition between miners is at a critical level.
What factors influence the complexity
The Bitcoin mining difficulty score is influenced by three main factors:
✅ The number of people and, accordingly, devices involved in the network
✅ The presence of a global block complexity, which depends on finding a valid hash below a certain level.
✅ The mining speed set directly by the mining pool.
The last parameter is different for each individual pool and each cryptocurrency.
How difficulty is calculated
The difficulty of mining blocks starts with a value of 1 and cannot go below this value. The network then compares the formation timestamps of each block to find out how long it took to form them.
If we want to know how long it took to create 2016 blocks, assign this parameter the variable T. We need 2016 blocks to be created in two weeks, so if T is equal to a different value, we multiply the complexity by (2 weeks / T). For example, if the extraction of the required number of blocks took only 10 days, then the difficulty is too low, it needs to be increased by 40%.
The difficulty of Bitcoin mining should rise or fall based on whether it took less than or more than fourteen days to generate 2016 blocks. As a rule, in the event of a drop in the network hash rate, the indicator also decreases.
You can roughly predict the next change based on the time the last blocks were found. However, no one can make long-term forecasts, although there are attempts to do this with the help of hardware achievements – Moore’s law, analysis of the course direction, etc.
The profitability of mining depends on many factors, including difficulty and halving (a periodic decrease in the reward). A miner who managed to create a new block on the network receives a cryptocurrency reward. It is considered that 10 minutes is enough for the equipment of the network participants to check all the transactions contained in the block.
The reward is received by the miner who found the block last, so the participants unite in pools – the group has a much higher chance of doing this.
At the moment, 12.5 Bitcoins are mined every 10 minutes in the world, and in 2020 this number will be reduced to 6.25 BTC. In parallel with this, the popularity of cryptocurrency is growing all the time, more and more people are coming to mining pools. And the received 12.5 coins are divided into hundreds of thousands of people; the income of each individual miner decreases. Accordingly, miners have to constantly increase the power of their equipment in order to earn at least something. But doing this is constantly difficult.
It remains only to follow the graphs of changes in difficulty and take into account that the number of miners connected to the network will always positively or negatively affect the profitability of the process.
Now a little about how the complexity of mining is related to the rise or fall of the cryptocurrency rate.
Analysts at DataLight in May 2019 saw an absolutely clear relationship between the difficulty of mining BTC and changes in the exchange rate. This year, 3 times there was a situation when a sharp rise in price followed immediately an increase in the difficulty of mining. If we consider the general annual changes, then in January the price of the coin doubled, and the complexity – by a third.
There are three main assumptions where the correlation comes from:
✅ Difficulty and hashrate go up with price as more miners try to get the reward.
✅ On the contrary, price follows complexity and hash rate.
✅ The relationship between the indicators is determined by the power law. If you track this ratio, you can develop a formula for calculating the BTC rate.
Which theory is correct, one can only guess, but many miners and investors have already decided to pay attention to this fact in order to make the right decisions.
Mining difficulty changes are closely related to the technological factor. Miners are interested in launching new high-performance equipment on the market, and they are also trying to lower the cost of electricity as much as possible – find free sockets or locate a farm in regions with low electricity costs. Cloud mining does not lose its relevance either.
As long as someone is engaged in mining, the difficulty will grow. From this, the profitability of the process will decrease, home mining will become obsolete as a phenomenon, those interested will go to exchanges or to mine altcoins. And Bitcoin mining will remain at the mercy of large-scale corporations that have enough funds and physical space to install hundreds of pieces of equipment.