Bitcoin (BTC) uses it proof of work consensus algorithm, which means that miners compete with each other to add new blocks to the blockchain and receive a reward for doing so. Basically, raw computing power is needed to keep the network running and it is provided by miners. They have large amounts of machines running that require constant computing power, either hash ratecontribute to the network.
Bitcoin mining
The mining difficulty is the degree of difficulty of the mining process, or of solving the math for ‘finding’ a new transaction block.
This difficulty is adjusted every 20,016 blocks, which is equivalent to about two weeks, according to the network’s hash rate. If the total computing power of the network were to increase, it would take less time for the miners to add a new block to the blockchain. Conversely, if computing power drops, it would mean that it takes longer to discover a new block.
By calibrating the difficulty level with the hash rate, the network can guarantee that a new block is added to the blockchain roughly every ten minutes.
Mining difficulty decrease
Been the past few weeks the hash rate dropped slightly, which reduced competition slightly. As a result, the mining difficulty adjustment ensured that miners can find the solution faster for adding a new block. The mining difficulty has decreased by 7.32%.
Earlier you could read in the Bitcoin news that the difficulty, with the previous adjustment, had risen to a new all-time high of 36.95 T. Data from BTC.com can be seen that since the beginning of August, the difficulty level had increased almost every time, with the exception of September 28 and November 7. This time, however, was the most significant drop since the summer of 2021, following China’s crackdown on Bitcoin mining.
The decrease in the hash rate shows that bitcoin miners, who are struggling economically, are disconnecting unprofitable machines. The fall in the bitcoin price, the rising energy prices and the increasing difficulty make it quite difficult for the miners and reduce the margins.