On-chain data shows that bitcoin mining difficulty decreased by more than 4% during the latest network adjustment.
bitcoin mining difficulty has decreased in the latest adjustment
The “mining difficulty” metric measures how difficult it would be for miners to mine blocks on the bitcoin network. The btc blockchain goes through an automatic adjustment every two weeks or so, where the value of this indicator changes.
To know whether this change would be positive or negative, one must first understand the purpose of the difficulty. In short, the difficulty exists as a measure to control the inflation of the asset.
The only way to increase the btc supply is by mining new blocks and receiving a block subsidy in return. The block subsidy has a fixed value, so the only variable related to the growth of the cryptocurrency's supply is the speed at which miners are mining new blocks.
Therefore, if you want to control the inflation of an asset, you need to limit this rate. Satoshi, the creator of the currency, recognized this problem and proposed a solution.
As miners increase their total computational power (known as hashrate), they naturally become faster at the mining process and therefore receive a block subsidy at a faster rate.
However, this is not something the btc network wants, so it increases its difficulty as a measure to slow down the miners enough to be in line with the desired speed, which is one block every ten minutes.
Naturally, when miners lose hashrate, the difficulty decreases, so miners can continue processing blocks at the usual rate even with lower processing power.
In fact, it would appear that this latter type of change occurred during the last adjustment, as the following chart suggests.
<img decoding="async" class="alignnone wp-image-315619 size-large aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/08/Relief-for-Bitcoin-miners-BTC-difficulty-corrects-by-4.png" alt="bitcoin Mining Difficulty” width=”980″ height=”414″ srcset=”https://bitcoinist.com/wp-content/uploads/2024/08/chart_5c7549.png?w=1383 1383w, https://bitcoinist.com/wp-content/uploads/2024/08/chart_5c7549.png?w=640 640w, https://bitcoinist.com/wp-content/uploads/2024/08/chart_5c7549.png?w=768 768w, https://bitcoinist.com/wp-content/uploads/2024/08/chart_5c7549.png?w=980 980w, https://bitcoinist.com/wp-content/uploads/2024/08/chart_5c7549.png?w=750 750w, https://bitcoinist.com/wp-content/uploads/2024/08/chart_5c7549.png?w=1140 1140w” sizes=”(max-width: 980px) 100vw, 980px” data-recalc-dims=”1″/>
The data for the btc mining difficulty over the past year | Source: Blockchain.com
During this latest downward adjustment, the btc network difficulty has decreased by over 4%. The chart shows that the adjustment prior to this one was a marked positive change, suggesting that the chain had been reacting to miners becoming significantly faster at their task.
The 7-day average mining hashrate chart would confirm this, as its value had skyrocketed to a new all-time high (ATH) before this difficulty increase.
<img loading="lazy" decoding="async" class="alignnone wp-image-315620 size-large aligncenter" src="https://technicalterrence.com/wp-content/uploads/2024/08/1723907374_203_Relief-for-Bitcoin-miners-BTC-difficulty-corrects-by-4.png" alt="bitcoin mining hash rate” width=”980″ height=”410″ srcset=”https://bitcoinist.com/wp-content/uploads/2024/08/chart_a55158.png?w=1388 1388w, https://bitcoinist.com/wp-content/uploads/2024/08/chart_a55158.png?w=640 640w, https://bitcoinist.com/wp-content/uploads/2024/08/chart_a55158.png?w=768 768w, https://bitcoinist.com/wp-content/uploads/2024/08/chart_a55158.png?w=980 980w, https://bitcoinist.com/wp-content/uploads/2024/08/chart_a55158.png?w=750 750w, https://bitcoinist.com/wp-content/uploads/2024/08/chart_a55158.png?w=1140 1140w” sizes=”(max-width: 980px) 100vw, 980px” data-recalc-dims=”1″/>
Looks like the value of the metric has been on the way down in recent days | Source: Blockchain.com
One consequence of difficulty is that when new miners join the bitcoin network, the revenue share of all involved miners becomes smaller since the block subsidy remains the same as before the new miners arrived.
The previous large difficulty increase had naturally put miners under pressure, a factor behind the drop the hashrate has seen since its ATH. With the difficulty seeing a negative adjustment now, it is possible that at least some miners feel that conditions have improved.
btc Price
At the time of writing, bitcoin is trading around $58,500, down more than 2% from last week.
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The price of the asset appears to have been consolidating recently | Source: BTCUSD on TradingView
Featured image by Dall-E, Blockchain.com, chart by TradingView.com
