Anika Begay
On-chain data shows that Bitcoin mining difficulty increased by more than 10% in the latest network adjustment.
Bitcoin mining difficulty saw a sharp increase in the latest adjustment
“Mining difficulty” is a fundamental feature of the Bitcoin blockchain that basically exists to control the inflation of the cryptocurrency. Although the supply of BTC has a limit, it has not yet been reached, so the supply of the asset is constantly increasing.
Miners “mine” new BTC by solving blocks on the network and receiving block rewards as compensation. These rewards always have a fixed BTC value associated with them, except for Halving events, which occur approximately every four years and permanently halve them.
Therefore, the only way to increase the token production rate is to produce blocks faster. Miners can do this by adding more computing power, thus increasing their total “hashrate”.
This effect, however, is only temporary, thanks to the existence of difficulty. In a universe where the BTC network did not have difficulty built in, miners could simply continue to increase the hashrate to mint the asset faster, eventually causing the coin’s value to succumb to high inflation.
Our Satoshi had the foresight to spot this problem and programmed the Bitcoin blockchain to target a standard block production rate of 10 minutes per block.
Whenever miners deviate from this rate, either by decreasing their hashrate or increasing it, the BTC network adjusts the difficulty just enough to counteract the change in hashrate. These adjustments happen approximately every two weeks and are completely automatic.
While a constant block production rate does nothing to reduce inflation (which would make the coin rarer), it certainly makes it predictable. The Halving event mentioned above is what exists to do the job of tightening the production rate.
The latest adjustment to the Bitcoin network happened recently and significantly increased the difficulty, as the following chart shows:
The value of the indicator appears to have seen a sharp spike recently | Source: CoinWarz
This sharp difficulty adjustment towards a new all-time high (ATH) would also imply a rapid increase in hashrate, and the 7-day average hashrate chart confirms this.
Looks like the value of the metric has seen a sharp increase in recent days | Source: Blockchain.com
As you can see in the chart above, Bitcoin’s 7-day average hashrate recently set a new record. This sudden jump in processing power meant that miners were pumping out blocks at a much faster rate than the network intended, so it increased the difficulty by over 10% to slow miners down to the standard rate.
BTC Price
At the time of writing, Bitcoin is hovering around $64,000, down nearly 3% in the last 24 hours.
The price of the coin seems to have been going down over the last few days | Source: BTCUSD on TradingView
Featured image from Dall-E, CoinWarz.com, Blockchain.com, chart from TradingView.com
