Bitcoin Mining Difficulty: A Complete Guide

Bitcoin is perhaps the best-known cryptocurrency in the world, although it is far from the only option out there. Still, bitcoin does receive the lion’s share of interest, particularly when it comes to mining. Mining is the process by which new bitcoins are released into the market, and there’s a lot to understand about this process. One of the aspects that is most challenging to wrap your head around is bitcoin mining difficulty. What does it mean and how does it affect you as a miner?

What Is Bitcoin Mining Difficulty?

Before we dive into an exploration of how bitcoin mining difficulty works, it’s important to try to establish an easy to understand definition. What is bitcoin mining difficulty? Really, it’s nothing more than a measure of how hard it is to find a hash below a specific target. It’s a 256-bit number, and this measure is applied at the block level. Within the world of bitcoin, there is a global block difficultly, and there is also mining pool share difficult. Note that the difficulty changes every 2016 blocks.

To determine the difficultly level, a specific formula is followed. This is:

Difficulty = difficulty_1_target/current target

In the above formula, difficulty_1 is usually a hash in which the first 32 bits are zeros. The remaining bits are ones.

All difficulties are based on a couple of things – a two-week period, and the discovery of 2016 blocks. The idea is that the basic time required to find 2016 blocks (at 10 minutes per block) would be two weeks. Everything about the difficulty and how it changes is predicated on this idea.

How Does Difficulty Apply to the Mining Process?

Bitcoin mining difficulty applies to whether or not a mined block is considered valid or invalid. If the block has a value equal to the currently specified by the mining difficulty. If the number is equal, the block is considered valid and is added to the global ledger. If it is not valid, then it is discarded. This is one of the most important safeguards against attackers. If an attacker were to attempt to create a false block, they would find it almost impossible to reach the specific difficulty at the time, and the false block would be automatically rejected as being invalid.

When Is the Difficulty Changed?

The bitcoin mining difficulty is not static. It changes regularly. In fact, it changes with every 2016 blocks created and accepted as being valid (invalid blocks are not counted in the total). The new difficulty will be set based on the speed with which the previous 2016 blocks were created. The faster that creation happens, the difficulty increases. If the process were to take a longer period, then the difficulty would be reduced.

The manner of change with the difficulty level ties directly to the number of active miners currently working to find blocks. As interest in bitcoin and bitcoin mining increases, more and more people explore mining as a means of generating income. This in turn decreases the time required to find 2016 blocks. The system automatically increases the difficulty for the next series of 2016 blocks as a result. Then, as miners leave the process, it takes longer to discover 2016 blocks, and the next sequence will have a lower difficulty. This creates a cyclical, predictable process with rising and falling mining times.

What Do Miners Get Out of It?

Finally, let’s address the reward system. To miners, the blocks discovered are of no inherent value. So, what do they get out of it? Actually, each block discovered gives the discoverer 25 bitcoins (the current value). This number is cut in half each 210,000 blocks.