Bitcoin Mining Difficulty

Bitcoin is a cryptocurrency which has no single central controlling agency but its value is determined by the transactions on bitcoin network. Bitcoin (BTC) is produced as an outcome of a successful mining. Bitcoin mining is the result of successful transaction being added on bitcoin ledger or the blockchain. It is achieved after there is a Proof-of-Work and that there was a clear effort of work through computational power and energy consumption.

The difficulty with bitcoin mining arises because there are only 21 million bitcoins in existence and it is estimated that around 3-4 million bitcoins are lost forever. The foundation of Economics discipline is the scarcity principle. The scarcer the resource then its demand and value is increased. As there are 18 million bitcoins already mined, it becomes more difficult to mine each new block. On average 144 blocks of bitcoin is mined per day with each block containing 12.5 BTC per block.

The successful completion of every transaction in the bitcoin network creates a hash. The high hash rate in the bitcoin network is the indication of the overall good health of the network. The higher hash rate also indicates the miner’s confidence in bitcoin as they are the result of an effective accomplishment of resolving a mathematical puzzle.

As more and more blocks are mined then it becomes increasingly difficult to mine the existing blocks. This results in increased mining difficulty as the various factors of production which are part of bitcoin mining comes to play. Bitcoin mining is heavily depended on the latest bitcoin mining hardware and processors which comes with a heavy price tag. Another source of strain for a bitcoin miner is the difficulty getting a constant source of electricity. The cheaper the cost of electricity to use for the mining equipment the more higher are the profits.

Bitcoin mining is at an all-time as of 2020; BTC hash rate has reached 126 quintillion hashes per second. The best way to onset the difficulty of bitcoin mining is to find cheap sources of electricity and invest in newer hardware.