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It's Never Been So Difficult to Mine Bitcoin

It's Never Been So Difficult to Mine Bitcoin 101
Source: iStock/MysteryShot

As bitcoin price jumped by around 60% in May and competition among miners of the most popular cryptocurrency increased, Bitcoin mining difficulty reached its new all-time high today, making it more difficult for miners to win the precious reward of BTC 12.5.

Meanwhile, hash rate, or computational power of the Bitcoin network is also inching closer to its all-time high reached in October 2018.

After the most recent adjustment, the mining difficulty increased by more than 11% today, while major Bitcoin mining pool BTC.com estimates it will increase by almost another 11% in less than 14 days. However, in the past, these estimates were not always accurate.

Bitcoin mining difficulty:

It's Never Been So Difficult to Mine Bitcoin 102
Source: BTC.com

Bitcoin’s difficulty has been again increasing since December 2018. There were in that month two substantial drops (15.13% and 9.56%), correlating with the drop in the price of the coin. Then in the last week of December, it spiked by 10.03%, reaching 5.62 T, and has been on a slow, but steady rise ever since, with just three minor drops, until it reached 7.46 T today.

The mining difficulty of Bitcoin is adjusted every two weeks (every 2016 blocks, to be precise) to maintain the normal 10-minute block time. This means that if there are many miners competing among themselves and propagating blocks in less than ten minutes, the difficulty of the next puzzle will be increased; if there are few miners and it takes them much longer to find a solution, the difficulty is decreased - both times just enough to keep block times at around 10 minutes.

Bitcoin mining pool distribution in May:

It's Never Been So Difficult to Mine Bitcoin 103
Source: BTC.com

In other words, when bitcoin price grows, it is likely that hash rate will increase, which means that there is an increase in the number of miners entering Bitcoin’s ecosystem. As competition among miners increases, so does the difficulty of the network, which means that miners need to use more of their computational power to get the mining reward (currently, BTC 12.5 per block, which will be cut by 50% in a year).

Hash rate of the Bitcoin network:

It's Never Been So Difficult to Mine Bitcoin 104
Source: blockchain.com
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