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Bitcoin mining is hard. It’s not necessarily hard to understand at a high level, but it’s hard to do. If you were to attempt to mine bitcoin on your laptop, you could toil away at it for years before discovering a block.But it didn’t used to be that way: back in the early days, it was possible to profitably mine BTC on a home computer. 14 years on from the genesis block, Bitcoin is still fundamentally the same. So what’s changed? The bitcoin mining difficulty, that’s what.This formula is designed to periodically adjust to make it harder to mine bitcoin blocks in response to more miners joining the network. But as you’ll discover, it doesn’t necessarily become harder to mine BTC over time – sometimes it becomes easier.In this article we’ll cover:<ul><li>How Proof of Work affects bitcoin mining difficulty</li><li>Why bitcoin mining difficulty adjusts</li><li>How this formula is calculated</li></ul><h3 id="it-all-starts-with-proof-of-work">It All Starts With Proof of Work</h3>Proof of Work (PoW) is the consensus mechanism used by many blockchain networks including Bitcoin. It is a way of validating transactions and adding new blocks to the blockchain by requiring network participants to solve complex mathematical problems. In a PoW system, miners compete against one other to be the first to solve the problem and add a new block to the blockchain.In the context of bitcoin mining, PoW is used to validate transactions and secure the network. Miners use their computational power in a race to find the answer to a mathematical problem that gives its finder the right to publish the next block and claim the mining reward attached. This is how new BTC is introduced into circulation and how new transactions are added to the chain.The PoW algorithm used by Bitcoin is called SHA-256 (Secure Hash Algorithm 256-bit). This algorithm takes an input (the transaction data) and produces a fixed-size output (the hash value). Miners compete to find a hash value that is below a certain target value set by the network difficulty level. This requires a significant amount of computational power, as miners must perform numerous calculations in order to find a hash value that meets the target requirements.Once a miner solves the problem and finds a hash value that meets the target requirements, they broadcast it to the network and other nodes verify the solution. If the solution is valid, the miner is rewarded with a certain amount of bitcoin, and the new block is added to the blockchain.<h3 id="what-is-bitcoin-mining-difficulty">What Is Bitcoin Mining Difficulty?</h3>Bitcoin mining difficulty is a measure of how hard it is to find a hash that meets the target requirements for adding a new block to the Bitcoin blockchain. As Blockchain.com <a href="https://www.blockchain.com/explorer/charts/difficulty" rel="noopener noreferrer nofollow">explains</a>, “The difficulty is…in more technical terms [how hard it is] to find a hash below a given target. A high difficulty means that it will take more computing power to mine the same number of blocks, making the network more secure against attacks.”The difficulty is adjusted every 2016 blocks, or roughly every two weeks, in order to maintain an average block time of 10 minutes. If more miners join the network, the difficulty increases to ensure that new blocks are added at a consistent rate. Similarly, if miners leave the network, the difficulty decreases.The difficulty level has a direct impact on the profitability of bitcoin mining. As the difficulty level increases, it becomes harder for miners to find new blocks and earn rewards. This means that miners need more computing power and electricity to compete, which increases their costs. Conversely, if the difficulty level decreases, mining becomes easier and more profitable.The difficulty level also affects bitcoin owners in terms of the security of the network. As the difficulty increases, it becomes more difficult for malicious actors to launch a 51% attack, a scenario in which a single entity controls more than half of the total mining power. This is because it would require a significant amount of computational power to successfully carry out such an attack.<h3 id="the-mining-difficulty-formula">The Mining Difficulty Formula</h3>Bitcoin mining difficulty is calculated using a formula that takes into account the current block difficulty, the target block time of 10 minutes, and the total network hashing power.Specifically, the difficulty is calculated as follows:New difficulty &#61; old difficulty x (2016 blocks / time taken to mine last 2016 blocks).The time taken to mine the last 2016 blocks is the average time it took to mine each block over that period and is used to adjust the difficulty level up or down. If the average block time is less than 10 minutes, the difficulty level increases to make it harder to find new blocks. If the average block time is more than 10 minutes, the difficulty level decreases to make it easier to find new blocks.The target block time of 10 minutes is a constant, which means that the difficulty level is adjusted only based on the time taken to mine the last 2016 blocks and the current difficulty level.The mining difficulty formula has worked faithfully since it was first devised by Bitcoin creator Satoshi Nakamoto in 2008. To this day, it remains a highly effective means of governing mining incentives. Regardless of total network hashrate and the number of entities participating in mining, the difficulty formula keeps Bitcoin in the Goldilocks zone for mining: not too hard, not too easy, but just right.That way, network users can be confident that new blocks will continue to be produced approximately every ten minutes. It’s worked faithfully for the past 14 years and it will likely continue to work smoothly for many years to come. Its elegance is an integral part of what’s made the Bitcoin network so reliable and so valuable to millions of users.

Understanding Bitcoin Mining Difficulty, the Formula That Governs Miner Incentives

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