What Is Bitcoin Mining Difficulty?

The concept of mining difficulty in Bitcoin is considered a very important variable for the price and for the security of the parent cryptocurrency. The miners are a key piece for the maintenance of the network. In order for miners to want to continue mining Bitcoin, they must obtain an economic return since in order to carry out the process they need to make a significant investment in powerful computer equipment . The difficulty is a variable that changes as the network matures and adjusts to its situation. In this article we are going to analyze what difficulty means when applied to cryptocurrency mining and why it is so important for the blockchain to remain secure.

What is mining difficulty in relation to Bitcoin?

The mining difficulty within the terminology of the crypto world refers to a number used within the network to be able to assign a level of difficulty, properly speaking, to the process that the miners will have to carry out in order to create a new block and add it to the pool. chain. It is therefore a unit of measure. It is used to specify how difficult it will be for a given node to find the 'hash' that will allow it to process the block. The proof-of-work algorithm created by Satoshi Nakamoto uses SHA-256 hashes to perform its calculations. The use of this tool pursues several objectives:
  • Allow the existence of a currency issuance system based on mathematical foundations and in a decentralized manner.
  • Offer greater security thanks to the use of encrypted systems and the need for the network to be supported by computers with a great capacity to perform calculations.
  • Avoid situations that endanger the validity of the asset, such as byzantine failures, double spending or denial of service attacks.
  • Protect transactions in the chain of blocks to prevent them from being modified or deleted once they have been confirmed and added to the chain.

How does the mining difficulty work?

Mining in Bitcoin and also in the other cryptocurrencies that use the proof of work system, allows the network to regulate itself automatically. Thanks to this protocol, the creation of new blocks is allowed, the generation of rewards and the issuance of new coins and the public and decentralized ledger that is the first workhorse of this technology.

The difficulty of mining in Bitcoin, without going into complicated technical details to understand if you do not have adequate computer training, you must control certain values ​​that are enabled in the network protocol . These values, called 'nonce' and 'hash', are what set the mining difficulty. The complete mining process in Bitcoin taking into account everything explained above would be the following:

The mining process

  • Every 10 minutes a new block is generated. A time limitation is established in the processing of the blocks. This is intended to regulate that the issuance of new currencies remains stable over time. In this way, it is avoided that if many blocks are generated very quickly, inflation can be generated, and on the contrary, if the blocks are processed slowly, the price could skyrocket due to the low supply.
  • The mining difficulty is adjusted once the mining process starts. This value is calculated taking into account the number of blocks that have already been mined and the 'nonce' and 'hash' values ​​corresponding to each new block. This process is carried out automatically and adjusts itself thanks to the protocol itself.
  • The network itself takes all the previous information and adjusts the difficulty to the appropriate level so that the blocks continue to be generated every 10 minutes. To do this, it will perform an average of the last 2016 blocks, using that value as a reference to adjust the average time in which new blocks are mined.
  • Once the value of the mining difficulty has been adjusted taking into account all the above aspects, the miners will then be able to enter the game of discovering the 'hash' to be the ones who have the task of confirming the block. In the event that the information generated is not valid, the process is carried out again. This prevents ' hacks ' from taking place and the network itself can correct itself in case there are transactions that do not match the previous blocks recorded in the distributed ledger.

The difficulty in mining other cryptocurrencies

We have explained how the Bitcoin mining difficulty adjustment process occurs and why it is so important for the network. Altcoins or alternative currencies to Bitcoin share a good part of their fundamentals and methods of operation with the parent cryptocurrency. Especially within Altcoins we have some 'tokens' that can be mined while others use different consensus algorithms . In the case of cryptocurrencies that use the same Bitcoin algorithm, and therefore can be mined, we can find the mining difficulty, although applied to each network in a particular way.

Altcoins that work through proof of work

The best example to understand this difference would be Litecoin . This digital currency is considered the silver of cryptos and is a currency that is closely related to Bitcoin. In LTC blocks are generated every two and a half minutes. This of course makes the mining difficulty in this asset different. However, the process by which it is calculated and the elements that are part of the mining and the confirmation of the blocks are the same.

In general, in all cryptocurrencies that use the proof of work protocol, the mining difficulty is the means by which it is intended to establish control over the process of creating and confirming new blocks. Thus, miners can carry out their work in a stable and secure way for the benefit of the network.

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