On-chain data shows that bitcoin mining difficulty has increased by more than 7% in the latest adjustment. Here's what it could mean for the asset.
bitcoin mining difficulty has seen an increase of more than 7%
In the bitcoin blockchain, there is a special built-in feature called “mining difficulty”. Basically, the reason this feature exists is to ensure that block rewards on the network continue to be delivered at a near-constant rate.
Block rewards refer to the btc that miners receive when they successfully add blocks to the network. These rewards are the only way to mint more cryptocurrencies. As such, the speed at which miners produce blocks is equal to the production rate of the asset.
When miners add more computing power to the network (thereby increasing the total “hash rate”), they naturally become faster at the mining process and therefore produce blocks at a faster rate.
However, this is problematic for the asset, as if miners continue to increase computing power in this way, they will mint the coin faster and faster, causing the value of the token to be affected due to how the dynamics of offer and demand.
Fortunately, Satoshi had the foresight to prevent the asset from falling prey to inflation in this way, implementing the mining difficulty system. When miners become faster than the network's expected speed of one block every ten minutes, the network increases its difficulty, causing miners to slow down.
Similarly, when miners reduce their computing power and block times become longer than the standard rate, the chain responds by making it easier to mine the asset.
These changes are made through adjustments that occur approximately every two weeks. The entire difficulty system is run by code, so these adjustments are completely automatic.
The latest adjustment just happened recently and has raised the network difficulty to a new all-time high (ATH).
<img decoding="async" class="alignnone wp-image-279298 size-large aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/02/Bitcoin-difficulty-shoots-up-7-to-new-ATH-what-does.png" alt="bitcoin Difficulty” width=”980″ height=”414″ srcset=”https://bitcoinist.com/wp-content/uploads/2024/02/chart.png?w=1389 1389w, https://bitcoinist.com/wp-content/uploads/2024/02/chart.png?w=640 640w, https://bitcoinist.com/wp-content/uploads/2024/02/chart.png?w=768 768w, https://bitcoinist.com/wp-content/uploads/2024/02/chart.png?w=980 980w, https://bitcoinist.com/wp-content/uploads/2024/02/chart.png?w=750 750w, https://bitcoinist.com/wp-content/uploads/2024/02/chart.png?w=1140 1140w” sizes=”(max-width: 980px) 100vw, 980px” data-recalc-dims=”1″/>
The value of the metric appears to have shot up recently | Source: Blockchain.com
As shown in the chart above, bitcoin mining difficulty has shot up by over 7% in the latest adjustment, implying that it would now be significantly difficult for miners to find new blocks.
The reason behind the rise, as expected, is that the mining hashrate has recently been at ATH levels.
<img loading="lazy" decoding="async" class="alignnone wp-image-279299 size-large aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/02/1707145821_241_Bitcoin-difficulty-shoots-up-7-to-new-ATH-what-does.png" alt="bitcoin Hashrate” width=”980″ height=”414″ srcset=”https://bitcoinist.com/wp-content/uploads/2024/02/chart_bd0d71.png?w=1390 1390w, https://bitcoinist.com/wp-content/uploads/2024/02/chart_bd0d71.png?w=640 640w, https://bitcoinist.com/wp-content/uploads/2024/02/chart_bd0d71.png?w=768 768w, https://bitcoinist.com/wp-content/uploads/2024/02/chart_bd0d71.png?w=980 980w, https://bitcoinist.com/wp-content/uploads/2024/02/chart_bd0d71.png?w=750 750w, https://bitcoinist.com/wp-content/uploads/2024/02/chart_bd0d71.png?w=1140 1140w” sizes=”(max-width: 980px) 100vw, 980px” data-recalc-dims=”1″/>
Looks like the value of the metric has been at ATH levels recently | Source: Blockchain.com
Interestingly, despite the sharp increase in bitcoin difficulty, the 7-day average value of the hashrate has not recorded any notable reduction yet, suggesting that miners still have their machines connected.
Last month's high difficulty caused the hash rate to drop, but as the difficulty was corrected in response, miners jumped to the easier network difficulty and significantly increased their computing power.
Some expected that as the difficulty increased again, some of these miners would go offline once again, causing the hashrate to return to previous levels. Since this has not happened so far, it appears that the newly added bitcoin hashrate is showing some resistance.
btc Price
At the time of writing, bitcoin is trading around $43,100, up 2% from last week.
<img loading="lazy" decoding="async" class="alignnone size-medium aligncenter" src="https://www.tradingview.com/x/IJZdJM8L/" alt="bitcoin price chart” width=”1534″ height=”864″/>
The price of the asset has shot up over the past day | Source: BTCUSD on TradingView
Featured image by Dmytro Demidko on Unsplash.com, TradingView.com charts, Blockchain.com
