Mining Difficulty

Published by Mario Oettler on

Over time more miners might try their luck in finding the solution to the hash puzzle. Another scenario is that the speed of the hardware improves. This would mean more attempts per second to solve the puzzle are done. This would reduce the time between two blocks dramatically. Although this sounds like a good thing first poses serious problems. If blocks are found too fast other miners would have no chance to hear of these new blocks in time because of the network latency. And this would mean miners work on outdated blocks which makes consensus difficult.

On the other hand, miners could just drop out of the game, which would result in a lower hash rate and longer block finding times in the network. In order to keep the time at a constant level, the difficulty needs to adjust. In Bitcoin, this is done every 2016 blocks by the miners following a predefined formula.

When Bitcoin started in 2009 it was pretty easy to find a hash puzzle solution. You could do that basically with your notebook. Nowadays you need a lot of specialized hardware for this task. The chart below shows the development of the difficulty in the Bitcoin network from 2009 until 2020.

Bitcoin mining difficulty. Source