26. What is the mining difficulty?
In the previous lesson, we discussed in detail the process of mining cryptocurrencies. An indispensable topic that is directly related to this process is the difficulty of extracting them. What does it actually mean”mining difficulty”? What does mining cryptocurrencies have to do with the term? We invite you to read.
Mining difficulty – definition
The difficulty of mining cryptocurrencies is a measurement unit that tells us how difficult it is to solve a given cryptographic puzzle. More industry-specific – how long does it take miners to find the right hash for a given block. Depending on the number of miners, the level of mining difficulty increases or decreases over time.
In the case of BTC, a new block is added every 10 minutes. The network is equipped with an appropriate algorithm that constantly adjusts the difficulty of the mining process to the current number of miners the network works. This ensures that blocks are discovered at a constant rate.
How is it working?
In the previous section, we mentioned that the mining difficulty is a variable parameter. It varies according to the quantity of miners on the network and hash rate. The main goal of mining is to keep the mining time between blocks constant. If the hash rate of the network is high, blocks will be generated quickly. In effect, the network will increase the difficulty level of mining. And vice versa – if the hash rate is low, blocks will be generated too slowly – the difficulty of mining will decrease.
Hash rate (hash power) – definition
It is a measure of a miner’s performance. The speed at which the computer creates output hashes from a given input. In progress mining cryptocurrencies, the miner passes the data through the “hash” function to create this output. This calculation is performed many times per second until the output hash meets the criteria. A miner whose hash meets the requirements can add his block to the chain and collect a well-deserved reward.
Difficulty of mining on the example of Bitcoin
With the increase in popularity of Bitcoin, the number of computers participating in its peer-to-peer network is also increasing. Engaged in mining, miners compete for a block reward. The greater the number of participants and computing power, the greater the hash power of the entire network. You already know that Bitcoin transactions are stored in blocks that are added to the blockchain every 10 minutes. To maintain this time, the block mining difficulty must be adjusted accordingly. In the case of BTC, it changes automatically after 2,016 blocks have been mined in the network. It increases or decreases depending on the number of miners and the hash power of the entire network.
Currently, most cryptocurrencies are extracted using the mining pool (mining pools). Miners prefer to join forces and solve complicated mathematical puzzles together.
Thanks to this procedure, they have a higher hash rate and have more computing power, which increases their probability of solving the puzzle. When a new block is discovered, each miner receives a reward proportionally to his share of the computing power in the pool. No one is harmed and everyone gets their share of the reward.
You already know what the mining difficulty is. You already noticed that it depends on many factors. Are you considering the difficulty of mining cryptocurrencies? Is their mining profitable? We can argue. We understand it is often like looking for a needle in a haystack.