What Is Crypto Mining Difficulty? Does It Affect You?

As crypto mining becomes more popular, making a worthwhile profit is getting harder. Various factors play into the rewards one can earn through crypto mining, including something known as mining difficulty. But what is crypto mining difficulty, and how can it affect your mining venture?

What Is Crypto Mining Difficulty?

Crypto mining difficulty relates to how hard it is to successfully mine a cryptocurrency block in the proof of work (PoW) consensus mechanism. It relates to how many hashes must be guessed in the mining process before a new block can be added to the chain (which we’ll explain a little more later). The higher the mining difficulty of a cryptocurrency, the more energy you’ll need to have a chance at mining a block.

Many valuable cryptocurrencies can currently be mined via the PoW mechanism, including Dogecoin, Litecoin, Monero, and Ravencoin. But the most valuable coin that you can mine nowadays is Bitcoin.

Bitcoin Mining Difficulty

The Bitcoin mining industry has become extremely competitive in recent years due to the massive surge of individuals looking to make a profit through mining Bitcoin.

Therefore, Bitcoin is now one of the most challenging cryptocurrencies to mine. Because Bitcoin itself is very valuable, the mining rewards are pretty hefty. At the time of writing, the Bitcoin block reward stands at 6.25 BTC, equating to around US$130,000 as of writing. This is undoubtedly alluring to miners, though Bitcoin’s reward is designed to halve every four years.

At the moment, it takes about ten minutes to mine a Bitcoin block. In this process, miners must use their mining hardware to reach a number (or hash) lower than or equal to the “nonce” or the number only used once. Once a miner’s hardware solves the computational problem and produces an acceptable number, they can add a new block to the blockchain and gain the mining reward.

But the high mining difficulty isn’t always a bad thing. The higher a cryptocurrency’s difficulty, the more secure it is. This is because a malicious group would need a vast amount of power to take over and control the network through a 51% attack. So, there are two sides to crypto mining difficulty.

Bitcoin’s mining difficulty is also reset regularly. After a certain number of Bitcoin blocks are mined, all nodes must recalculate, which resets the difficulty. When there’s a spike in the number of miners in the network, Bitcoin’s algorithm will increase the difficulty so that blocks cannot be mined too quickly. The less time it takes to mine a block, the less time miners take to ensure that each block is valid and therefore reach a consensus.

Bitcoin’s total supply is fixed at 21 million. This means that there will only ever be this many Bitcoin in existence. Because this supply limit is relatively low and Bitcoin is very popular, the network needs to ensure that coins aren’t being put into circulation too quickly. This helps Bitcoin to keep its price somewhat stable (in cryptocurrency terms, at least), as cryptocurrency prices often rely on a supply/demand balance. If the supply exceeds the demand, the price will likely fall.

Nowadays, Bitcoin’s difficulty is measured in the trillions, though the number is often simplified into a shorter number. For example, Bitcoin’s difficulty at the time of writing stands at 36.84 trillion (or 36,840,000,000,000) but is written as 36.84.

The Bitcoin mining difficulty is generally increasing over time, which is the case for many cryptocurrencies.

Altcoin Mining Difficulties

Dogecoin, Litecoin, and Monero have all experienced an increase in mining difficulty since 2020, though the degree of growth varies from coin to coin. The mining difficulty of cryptocurrencies is somewhat similar to their prices in that they constantly fluctuate and are subject to significant changes at any moment. Such is the nature of cryptocurrency!

But some cryptos aren’t seeing a general increase in their mining difficulty, such as Bitcoin Cash and Feathercoin. If the number of miners in a network decreases, the difficulty will also decrease.

Difficulty Is Integral to the Mining Industry

While many miners find increasing difficulty levels very frustrating, this element of proof of work blockchains is undoubtedly crucial. Without mining difficulty, these networks couldn’t maintain security and control their circulating supply as easily. So, while it may seem like a downside when it increases, it also serves a vital role to the network and, therefore, to its users.

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