What Is Bitcoin Mining Difficulty?
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Tick, tock, next block. Some describe Bitcoin as a timekeeper. The network targets an average block time of ten minutes, and Bitcoin mining difficulty is at the heart of Bitcoin’s steady march. This is why many consider a Bitcoin transaction final after 60 minutes (six network confirmations). Bitcoin difficulty adjusts depending on the network’s overall hashrate, keeping the average time per block at 10 minutes. As more hashpower comes online, difficulty increases, making it harder to mine a new block.
In this guide, we’ll discuss Bitcoin mining difficulty, although other proof-of-work networks have adopted a similar strategy, including Litecoin, Ethereum Classic, and Kaspa. Each of these networks uses mining rewards to incentivize miners. Incentives attract competition, which then leads to an increase in hashrate. Periodic difficulty adjustments keep the network running like clockwork. Let’s explore how this clever system works.
What Is Difficulty in Bitcoin Mining?
Bitcoin difficulty is a measure of how much work is required to find the correct hash value to mine a new Bitcoin block. In block 855,766 mined in August 2024, the difficulty was 90,666,502,495,565.78 (90 trillion). By comparison, block 100, mined in Jan 2009, had a difficulty of 1.00. At today’s network hashrate, a block with the same difficulty as block 100 would be mined instantly.
Difficult adjustments keep miners on a relatively fixed block production schedule. The Bitcoin network targets a 10-minute average block time, meaning the network as a whole produces one new block of transactions at 10-minute intervals.
Proof-of-work networks like Bitcoin depend on hashing, which is, in simple terms, systematic guessing. Miners work to find a qualifying encrypted hash value to mine a new block and add the block’s transactions to the blockchain.
However, as miners come online or go offline, and as more efficient mining hardware becomes available, the network hashrate changes. Without a difficulty adjustment, block times become erratic and might require mere milliseconds — or could drag on for weeks or months. The result would be an unreliable peer-to-peer electronic cash system, failing to achieve the goals outlined in the Bitcoin Whitepaper. Bitcoin’s inventor, Satoshi Nakamoto, solved this problem with a Bitcoin difficulty adjustment.
Over time, difficulty adjusts as a response to network hashrate, as shown in the Bitcoin difficulty chart below.
How Does Bitcoin Difficulty Work?
To maintain a 10-minute average block time, the Bitcoin network automatically adjusts the difficulty level. We’ll discuss frequency in just a bit. The difficulty itself is expressed as an integer.
- Block 100 Difficulty: 1.00
- Block 855,766 Difficulty: 90,666,502,495,565.78
Bitcoin miners generate hashes to find a qualifying value that mines a new block. A hash is an algorithmically generated alphanumeric string representing an input value or multiple inputs. Bitcoin uses the SHA-256 algorithm to generate hashes.
In plain English, a hash converts large or small inputs into a fixed-length value, and the same inputs always generate the same output.
Here’s a simple example.
| Input | The rain in Spain falls mainly on the plain. |
| SHA-256 Hash | 56dec51bfb831a1ce1104f05146db68812f8012e5eab71786a058c153004c311 |
Let’s change one character, replacing the period with an exclamation point.
| Input | The rain in Spain falls mainly on the plain! |
| SHA-256 Hash | 0b651d9a32ff7bf5018ac54309ab83dc161009b21b9ba5e9b34017c4678a5be7 |
The output changes, and it’s also possible to generate a single hash from several hashes, each containing small or large data inputs. That’s what miners do. Bitcoin miners include the previous block’s hash, transaction data, and a nonce (number used only once) to generate a hash for the block. However, the network also uses a target difficulty. The hash must fall below a target value derived from the target difficulty.
That’s where the nonce comes in. The nonce increments after each unsuccessful guess, and the difficulty requires a successful hash (one that mines a block) to fall beneath a target value. On a simple level, it works like a game of limbo, in which it becomes increasingly difficult to get under the bar.
If the number of hashes generated by the worldwide mining network increases, Bitcoin increases the difficulty by requiring a lower value for the hash.
- Block 100 Hash: 000000007bc154e0fa7ea32218a72fe2c1bb9f86cf8c9ebf9a715ed27fdb229a
- Block 855,766 Hash: 000000000000000000015546af5376863c5e8317b2721f0f3241384d093e0aba
Notice the second (higher difficulty) hash also contains more leading zeros. A higher Bitcoin difficulty level sets a lower target. Lowering the target increases the number of guesses (hashes) required by the network to find a qualifying hash.
The idea of a lower hash value becomes easier to understand when you convert hexadecimal to decimal.
- Block 100: 13032943865131900238397527987929768584784318110615615145485021160090
- Block 855,766: 127686552981723337823271230430478059444813902211058362
A higher difficulty level requires a lower value for a qualifying hash, making it harder to find. Like a game of Limbo, how far under the bar you go doesn’t matter, but you must go below the bar.
Conversely, if the network hashrate falls, the difficulty level adjusts accordingly, raising the target. This happened in June 2024, when the Bitcoin difficulty fell by nearly 8%.
How is Bitcoin Mining Difficulty Adjusted?
Although mining occurs around the clock and the hashrate changes, Bitcoin adjusts the difficulty at fixed intervals. Every 2,016 blocks, the network reassesses the difficulty compared to the hashrate and adjusts the difficulty up or down accordingly to maintain an average of one block mined every ten minutes. This works out to about once every two weeks.
The Bitcoin difficulty adjustment looks backward to set a target going forward. This begins with a formula considering the time it should take to mine 2016 blocks, with one block mined every ten minutes. The result should have been 20,160. However, it probably isn’t, meaning a difficulty adjustment is needed.
Next, it’s time to compare the actual time it took to mine 2,016 blocks. Let’s say this elapsed time was 18,000 minutes.
- 20,160 (target time) / 18,000 (actual time) = 1.12
A quick glance indicates that the difficulty was 12% lower than needed for an average ten-minute block time.
The resulting number (1.12) is then multiplied by the current difficulty level to set the new difficulty level going forward. Let’s say the current difficulty is 14,484.16, as it was in block 100,000.
- 14,484.16 x 1.12 = 16222.2592
Each crypto node in the Bitcoin network would then set the difficulty level to 16222.2592, reducing the target to a lower number. This makes mining more difficult by requiring more hashes to find a qualifying hash. However, it puts the network back on pace for an average of one block every ten minutes based on the hashrate for the previous 2,016 blocks.
Different proof-of-work networks may use differing formulas or intervals to adjust the difficulty. However, similar schemes are common for proof-of-work protocols.
Factors Influencing Difficulty Adjustments
Several factors influence the amount by which difficulty must be adjusted. These include miner participation and hardware advancements, both of which contribute to hashrate. In the end, it all comes down to hashrate. Let’s explore each of these factors in more detail.
1. Total Network Hash Rate
The total network hashrate determines how quickly the network finds new Bitcoin blocks. Hashrate, in lay terms, is the number of guesses per second. If the hash generated by a miner doesn’t qualify, the miner tries another hash with a new nonce.
The Bitcoin hashrate chart below compares the hashrate to the block size, meaning the amount of data in a block. The two show little correlation because the block’s data is instantly converted into a hash value for mining purposes. However, the total network hashrate, indicated with a blue line, shows a steep upward trend.
The chart also indicated several deep declines, during which time the Bitcoin mining difficulty was reduced. The deepest of these hashrate declines occurred in 2021 when China banned crypto mining. Miners elsewhere replaced this missing hashpower, sending global hashrate higher in 2022 and beyond.
2. Technological Advancement of Mining Hardware
Bitcoin mining began with CPU mining. A modestly powered computer had a high enough hashrate to mine competitively. The Bitcoin community was miniscule then, and Bitcoin’s value was measured in pennies – or even less. In 2010, Laszlo Hanyecz famously paid 10,000 bitcoins for two pizzas in 2010.
Over the years, Bitcoin mining rigs have become more advanced, with many miners using application-specific integrated circuits (ASICs) for mining. These devices are purpose-built for mining a specific algorithm, SHA-256, in Bitcoin’s case. The arrival of GPU mining, Field-Programmable Gate Arrays (FPGAs), and ASICs propelled the network hashrate higher, leading to a much higher difficulty level.
3. Level of Miner Participation
Even as newer hardware makes Bitcoin mining more efficient, the level of participation by miners plays a huge role in hashrate. Several factors affect miner participation, many of which center on profitability. However, regional regulation also changes participation. When China banned Bitcoin mining, worldwide hashrate fell dramatically.
The economics affecting miner participation center on three main factors.
- Bitcoin Price: Miners earn block rewards, including newly mined bitcoins and fees for transactions within the block. The mining rewards are reduced periodically due to Bitcoin’s Halving, which reduces the rate of new supply. In between, Bitcoin’s price ebbs and flows, sometimes making mining unprofitable at higher difficulty levels.
- Electricity Costs: Bitcoin mining uses a lot of electricity, with the cost associated with mining providing a disincentive to fraud. However, when electricity costs spike, mining can be less profitable or even generate a loss.
- Hardware Costs: Now that mining isn’t efficient without specialized hardware, the cost and lifespan of specialized hardware become expenses miners have to weigh. However, low-cost ASICs can make mining viable for smaller operators.
When Does the Difficulty Change?
The Bitcoin mining difficulty changes about every two weeks on a 2,016-block interval. However, dramatic changes are less common. Bitcoin difficulty reached one trillion for the first time in September 2017, rising to more than 1.4 trillion by October before falling back to 1.35 trillion. Difficulty adjustments immediately following that period showed a steady climb rather than huge moves.
However, in the fourth quarter of 2018, difficulty dropped from nearly 7.5 trillion to just over 5.2 trillion. Mid-2021 saw an even larger drop in difficulty, nearly halving the network difficulty between May 2021 and July of the same year.
Despite these dips and a few dramatic moves, the overall trend for Bitcoin difficulty remains up and to the right.
How Does Mining Difficulty Impact Miners?
As mining difficulty increases, miners’ profitability may decrease, although the price of Bitcoin plays just as large a role.
For illustration, we can consider a situation in which Bitcoin’s price is flat, but mining difficulty increases. The network as a whole is generating more hashes per second. If an individual miner isn’t increasing their own hashrate at a corresponding or higher rate to the network as a whole, they’re losing some market share of mining rewards.
Let’s explore how difficulty affects miners in more detail.
1. Profitability and Costs
Increased difficulty means miners must increase their hashrate to meet the same level of profit, assuming stable Bitcoin prices. However, this increase in hashrate also requires more electricity and perhaps additional mining rigs.
Estimates from the US Energy Information Administration indicate that Bitcoin mining may represent as much as 2.3% of total energy consumption. However, many larger mining companies have turned to renewable energy sources or mining with stranded energy that would be otherwise unusable.
While Bitcoin’s difficulty impacts profitability, the system manages these challenges well. If profitability falls, hashrate will also fall, causing the difficulty to adjust. Lower difficulty often makes mining profitable again for miners who turned off their rigs. In this respect, Bitcoin’s difficulty creates opportunities as well as challenges.
2. Increased Competition Between Miners
As an expected result, increases in Bitcoin difficulty cause increased competition. The steady increase in difficulty has led to innovation with more efficient mining hardware. Miners have also been forced to find cheaper or renewable energy sources. All of this comes at a cost, however, as more efficient mining hardware can cost thousands of dollars per rig. Infrastructure to capture renewable energy can also be extremely expensive for larger companies.
In the end, many miners – both large and small – are betting on the long-term price of Bitcoin, some hoarding Bitcoin stashes to sell at a later date when prices are more favorable.
Conclusion
Bitcoin difficulty is a clever mechanism designed to keep the Bitcoin block production rate on schedule. By adjusting the Bitcoin mining difficulty up or down every 2,016 blocks, the Bitcoin protocol maintains an average block time of about 10 minutes. These periodic adjustments aren’t without challenges for the miners, however, and the long-term trend has been a steep upward slope that forces miners to invest in newer hardware and find lower-cost energy sources.
References
- Bitcoin: A Peer-to-Peer Electronic Cash System (bitcoin.org)
- Drop in Bitcoin Mining Difficulty ‘Comparable to FTX Collapse,’ CryptoQuant Says (Business Insider)
- Total Hash Rate (TH/s) (blockchain.com)
- China’s top regulators ban crypto trading and mining, sending bitcoin tumbling (reuters.com)
- Everything to Know About Bitcoin Pizza Day (finance.yahoo.com)
- Tracking electricity consumption from U.S. cryptocurrency mining operations (eia.gov)
- Bitcoin mining boosts the transition to renewable energy (cointelegraph.com)
- Bitcoin Mining: A Path To Electrifying The World (nasdaq.com)
Ihssan El Medkouri 
Connor Brooke 