On-chain data shows that the Bitcoin mining difficulty has seen an increase in the latest adjustment, which is a result of the hash rate recovery.
Bitcoin mining difficulty has seen a positive adjustment of 3% recently.
The term “mining difficulty” refers to a feature built into the Bitcoin blockchain that controls how difficult it is to mine on the Bitcoin network at the moment. The difficulty undergoes periodic adjustments approximately every two weeks, which are entirely controlled by code and therefore, completely automated.
When the network adjusts the difficulty positively, it means that miners will find it more difficult to mine on the blockchain compared to the past two weeks, and therefore, their pace will slow down.
On the other hand, BTC undergoing a negative adjustment means that miners will be able to mine blocks on the network faster than they have been for the past two weeks.
Now, here’s a chart showing how the last few adjustments have changed Bitcoin’s difficulty:
Looks like the value of the metric has spiked recently | Source: CoinWarz
As you can see in the chart above, the latest Bitcoin network adjustment has increased the mining difficulty. More specifically, the metric has increased by 3% compared to the value at the end of the last adjustment.
To understand the reason behind this change (or any previous change, for that matter), you must first understand the purpose behind the mining difficulty.
One of the features of the Bitcoin blockchain is that the supply of the cryptocurrency increases as miners pass through blocks and receive block support as compensation.
Miners use computing power to solve puzzles that give them the opportunity to add the next block to the chain, so when they increase their computing power, they become faster at their task, and therefore, they can produce blocks at a faster rate.
But since the rate of production of the asset itself is tied to this task performed by miners, leaving the growth of miners unchecked could lead to an explosion in the supply of the asset, negatively impacting its price, due to how supply and demand dynamics work.
As a measure to keep the rate at which miners produce their units at a constant value, Satoshi, the creator of Bitcoin, decided to program the concept of difficulty. Because of this feature, whenever miners increase their power, the network responds by increasing the difficulty in the next adjustment.
The total computing power of miners is called the “hash rate.” Below is a chart showing the trend in the 7-day average of this metric over the past year.
The value of the indicator has been on the rise in recent days | Source: Blockchain.com
As expected given the positive difficulty adjustment, Bitcoin mining hashrate has been on the rise recently. Miners had previously been reducing the size of their facilities, which led to a decrease in the metric, but it seems that they have gradually started adding mining rigs to their farms.
Bitcoin price
Bitcoin dropped below $60,000 yesterday, but the coin appears to have recovered back above that level today.
The price of the asset seems to have plunged over the last few days | Source: BTCUSD on TradingView
Featured image by Dall-E, Blockchain.com, CoinWarz.com, chart by TradingView.com
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