Mining Difficulty Of Both Bitcoin And Ethereum Are On The Rise
Just in a single day, Bitcoin’s mining difficulty increased by about 4.25%. If you thought that was shocking, Ethereum increased by about 20% during the same duration.
Mining Difficulty is a parameter that bitcoin and other cryptocurrencies use to keep the average time between blocks steady as the network’s hash power changes. Bitcoin and other cryptocurrencies that use proof-of-work blockchains are maintained through a process called mining. In this system, miners – computers running the cryptocurrency’s software client – compete to find a new block, adding the most recent batch of transaction data to the chain.
The bitcoin whitepaper says:
“To compensate for increasing hardware speed and varying interest in running nodes over time, the proof-of-work difficulty is determined by a moving average targeting an average number of blocks per hour. If they’re generated too fast, the difficulty increases.”
As more miners join, the rate of block creation will go up. As the rate of block generation goes up, the difficulty rises to compensate which will push the rate of block creation back down. Any blocks released by malicious miners that do not meet the required difficulty target will simply be rejected by everyone on the network and thus will be worthless.
Ethereum’s mining difficulty struggles have been anticipated as one of the many reasons for the delay in the Constantinople update was because of an abrupt ending. A Reddit user weighed in on this:
“Difficulty bomb creates a different equilibrium point because it is now adding about 1/2500 every block, and the adjust is in units of 1/1024, so there is a meaningful increase in difficulty, which needs to be offset by a meaningful number of blocks getting solved >18 seconds. This basically means that difficulty will increase until the average block solve time is just over 20 seconds.”