Key takeaways
- Difficulty adjustments every 2,016 blocks help maintain a consistent 10-minute block time, preventing rapid inflation and network overload.
- In October 2024, Bitcoin mining difficulty hit a record high of 95.7 trillion, driving up energy consumption and putting pressure on miners’ profitability unless they adapted with more efficient equipment or lower energy costs.
- Changes in the network’s hashrate, due to factors like more miners or better equipment, directly influence Bitcoin’s mining difficulty in maintaining block times.
- Bitcoin’s energy consumption concerns led miners to explore renewable energy and other solutions to stay competitive and sustainable.
Bitcoin mining is the process of solving complex math problems to secure the network and create new coins. To make sure new blocks are added at a steady rate, the difficulty of these problems adjusts regularly.
In simple terms, when more miners join the network, it gets harder to mine Bitcoin (BTC), ensuring the supply remains predictable and the system secure.
This article explains what Bitcoin mining difficulty is, how it adjusts over time to keep the network secure and stable, how it is calculated and what factors impact mining profitability.
Understanding Bitcoin mining difficulty
Bitcoin mining difficulty ensures the network adds blocks at a steady 10-minute interval, preventing rapid inflation and network overload. Miners must find a hash with a specific number of leading zeros by adjusting a “nonce.” This difficulty adjusts every 2,016 blocks to maintain stability and security in the network
The truth is, Bitcoin mining doesn’t have to be difficult at all. Essentially, all a miner is doing is encoding the following information:
- Previous block header: Links the new block to the previous one, maintaining the chain’s continuity.
- Merkle root: A hash that represents all the transactions in the block, allowing for efficient verification of the data's integrity.
- Timestamp: The time when the block is created, used for chronological ordering.
- Version number: Specifies the version of the block and the protocol rules it follows.
For a modern Bitcoin miner, calculating the hash for a new block should be instantaneous. So why isn’t that the case?
First, the blockchain would be overwhelmed with blocks being added at an uncontrolled rate. This would lead to a flood of new Bitcoin entering the market, resulting in hyperinflation. The value of Bitcoin would plummet as new coins would be created far faster than the supply schedule intended, disrupting the delicate balance that maintains its scarcity.
Second, a rapid addition of blocks would strain the network, making it difficult for nodes to stay synchronized. Full nodes, which validate and store the entire blockchain, would struggle to download and verify the excessive number of blocks, leading to network fragmentation. This could make it easier for bad actors to exploit security vulnerabilities, such as executing a 51% attack because the sheer pace of block production would hinder proper validation and consensus among nodes.
Last, transaction processing would become chaotic. The lack of a difficulty adjustment would mean there would be no structured interval for transaction confirmations, undermining the network’s reliability. The predictable 10-minute block time is essential for ensuring that transactions are processed in a timely but orderly manner. Without this, users could face unpredictable transaction times and inconsistent fee structures, reducing trust in the network.
A natural solution to this problem is simply increasing the difficulty of encoding this information.
Bitcoin, and other proof-of-work chains such as Monero and Litecoin, address this by requiring the miner to encode the information not just into any hash, but into a hash that fits a certain size requirement.
For instance, if you encode the phrase “I love Cointelegraph” into a 256-bit hexadecimal hash through an algorithm like SHA-256, you’ll get:
148530ee91a00571250b58ea69c9947b10a702cf135b3f56cdad39f74450d145
This is a pretty large integer. So, what can be done to shorten it?
By adding information that changes the output (this is called a nonce), you’d need to go through trial and error approximately 16 times to get one leading zero:
I love Cointelegraph 64
04dc36a0b5a40cba5524cd80064bcb5d21dfd28ecd811684f520a73e38362abf
Perhaps that’s not small enough. To get two leading zeroes, you’d need about 256 attempts. Let’s change the nonce to 98 and see the result:
I love Cointelegraph 98
00ddde1a51e44602a4397cb80f51dc218e6bbc3b50ac4dc4b612e7d62016ca02
Success! Now, how many attempts would you need to reach three leading zeroes? Around 4,000 attempts. And for twenty leading zeroes? Likely, the number would run into the septillions.
Indeed, this is how mining difficulty works: The hash must start with a set number of zeros. This, in turn, requires a “nonce” value to be added to the hash by the miner, usually somewhere between 0 and around 4,000,000.
Depending on how quickly miners meet these requirements, the difficulty is automatically adjusted every two weeks (or, more precisely, every 2,016 blocks) to ensure that the block time remains as close as possible to an average of 10 minutes.
Here’s an example of a block header that successfully met the mining difficulty requirements in November 2024:
00000000000000000000a497c6b1be95b76a9e25a797f8fe49953d40c06a027e
Think of it as a classroom of students with a math problem. If most students finish too quickly, the teacher makes the next problem harder.
If they take too long, the next problem is easier. Similarly, Bitcoin's network monitors how fast blocks are added and adjusts the "problem difficulty" to keep the 10-minute interval consistent.
This balance is crucial for maintaining a predictable supply of new Bitcoin and ensuring network security.
Calculating Bitcoin mining difficulty: How difficult is it to mine a block?
Bitcoin mining difficulty, or “nBits,” includes an exponent and coefficient to set the target for mining. Lower target values mean higher difficulty.
The “difficulty” mentioned is actually more correctly known as the “nBits.” This field is a compact representation of the mining difficulty that consists of two main parts:
- Exponent: The exponent indicates how many bits must be shifted to the left to set the correct target. Essentially, it determines the overall “size” of the target by specifying how many places the coefficient should be moved. In short, it dictates the zeroes.
- Coefficient (or significand): The coefficient is the numerical value that, when combined with the exponent, defines the actual threshold. This value provides the finer detail needed to adjust the difficulty in a precise manner. In short, it dictates the high value numbers (significand) that come after the leading zeroes.
The combination of these two elements gives the complete difficulty target that miners must match or be below to successfully mine a block.
For example, a specific nBits value of 0x1b0404cb means:
- The exponent is 0x1b (or 27 in decimal), indicating that the coefficient is shifted left 27 bits.
- The coefficient is 0x0404cb (or 263755 in decimal), which forms the base number for the target threshold.
These components are crucial because they define how difficult it is to mine a new block. The lower the target value, the more challenging it is to find a hash that meets the criteria.
Did you know? The term nBits stands for “network bits.” It is a compact representation used in Bitcoin mining to denote the difficulty target for miners.
Factors influencing Bitcoin mining difficulty
When the hash rate rises due to more miners or better equipment, difficulty increases to maintain a 10-minute block time. If the hash rate falls, difficulty decreases.
As mentioned, Bitcoin's mining difficulty is a dynamic parameter that adjusts approximately every two weeks (or every 2,016 blocks). The state of the total network hash rate is the primary reason for a changing nBits. After all, it represents the combined computational power of all miners in the Bitcoin network.
A higher hash rate indicates more miners or more powerful mining equipment contributing to the network. When the hash rate increases, blocks are mined more quickly than the intended 10-minute interval. To compensate, the network increases the mining difficulty, ensuring that blocks continue to be added at a steady rate. Conversely, if the hash rate decreases, the difficulty is lowered to maintain the block creation time.
For example, in October 2024, Bitcoin's seven-day moving average hash rate reached an all-time high of nearly 703 exahashes per second (EH/s), leading to a corresponding increase in mining difficulty.
The reverse is also possible. If miners leave the network, or if their mining equipment becomes outdated or unprofitable, the total hash rate will decrease.
Such an instance occurred in late 2021 when China's crackdown on cryptocurrency mining forced many mining operations to shut down or relocate. This sudden decrease in the hash rate led to a significant reduction in mining difficulty. In July 2021, Bitcoin saw its largest single downward difficulty adjustment of about 28%, allowing miners to continue mining blocks at a reasonable pace despite the reduced network power.
Did you know? The evolution from CPU and GPU mining to ASIC miners has drastically increased the network's hash rate over the years, necessitating regular adjustments in mining difficulty to maintain the target block time.
Bitcoin mining difficulty – a timeline
The mining difficulty number represents how much harder it is to mine a new block compared to the baseline difficulty, which is 1 (the easiest level when Bitcoin was first launched). For example, if the difficulty number is 10,000,000, it means that mining a block is 10 million times more challenging than it was when the difficulty was 1.
2009 – Genesis and early years
- January 2009: The mining difficulty begins at 1, the simplest level, as Satoshi Nakamoto mines the genesis block using basic CPUs. This low number indicates minimal competition and computational power needed to mine a block.
- December 2009: Difficulty remains at 1, reflecting the limited number of participants in the network.
2010 – Transition to GPU mining
- July 2010: The emergence of GPU mining leads to the first notable increase in difficulty. By the end of 2010, the difficulty rose to about 14, representing a shift from casual mining to more competitive participation with better hardware.
2013 – ASIC mining era
- January 2013: The introduction of ASIC miners causes a significant jump in difficulty as they provide a massive boost in computational power compared to GPUs. The difficulty rises to about 3,500,000.
- December 2013: By the end of the year, difficulty soars to about 1,500,000,000, reflecting the rapid adoption of ASIC technology and increased network hash rate.
2017 – Bitcoin’s bull market
- January 2017: The mining difficulty is around 300,000,000,000, a substantial increase driven by improved mining hardware and a growing number of miners entering the market due to Bitcoin’s rising price.
- December 2017: By the end of the bull run, the difficulty reaches about 1,590,000,000,000, mirroring the increased competition and investment in mining infrastructure as Bitcoin’s price approaches $20,000.
2020 – Third halving and its effects
- May 2020: Just before the third halving, mining difficulty is about 16,100,000,000,000. The halving cuts the block reward from 12.5 to 6.25 BTC, prompting adjustments in miner participation and profitability.
- December 2020: Mining difficulty climbs to around 18,600,000,000,000 as miners adapt to the new economic conditions and continue to invest in more efficient mining equipment.
2021 – China's mining ban
- May 2021: China’s crackdown on mining causes a sharp drop in hash rate. The difficulty falls by 28% in July 2021, down to about 14,400,000,000,000. This drop is the largest single downward adjustment in Bitcoin’s history, showcasing how policy changes in major mining regions can impact the network.
- December 2021: As miners relocate to new regions and resume operations, the difficulty recovers to about 24,200,000,000,000.
2024 – Record highs
- October 2024: The mining difficulty reaches a record high of 95,672,703,408,223, reflecting a significant increase in global hash rate, advancements in mining hardware and broader adoption.
How difficulty influences Bitcoin miner revenue
As more miners join the network or upgrade their rigs, difficulty adjusts upward to keep block times consistent at 10 minutes. This means each miner has to perform more calculations to solve a block, which drives up their energy costs and cuts into their margins.
As you’ve seen, in October 2024, difficulty hit an all-time high of about 95.7 trillion. This intense competition forced miners to use even more power and, for many, that meant lower profits if they couldn’t offset the costs.
Still, miners aren’t sitting back while costs rise. Here are some strategies they use to stay ahead:
- Upgrading hardware: Newer, more efficient ASICs help miners get more hashing power per watt. By regularly updating their equipment, they can keep costs down even as difficulty climbs.
- Cutting energy costs: Many miners relocate to regions with cheap electricity or renewable energy sources. Lower energy costs mean better profits, and sustainable sources can offer a stable price over the long term.
- Scaling up: Running larger mining farms helps spread out costs. Bigger operations can buy in bulk and get better deals on equipment and electricity, improving their bottom line.
- Adding revenue streams: Some miners offer cloud mining or rent out space in their data centers to offset costs. Others are even experimenting with AI services to tap into new sources of income.
- Merging and expanding: Mergers with other mining firms let companies pool resources and reduce competition, helping them weather the ups and downs of difficulty and Bitcoin price changes.
These strategies help miners navigate rising difficulty levels and stay profitable in a fiercely competitive market. But with every difficulty spike, they’re pushed to find new ways to keep mining economically viable.
The future of mining difficulty
Bitcoin may seem well-established, but its future is far from guaranteed.
Government policies increasingly impact mining and difficulty adjustments. In 2022, Kazakhstan's tax on mining energy caused a temporary dip in the hash rate as miners faced higher costs.
On the flip side, El Salvador has embraced mining by promoting geothermal energy, which stabilized the hash rate and supported higher difficulty. Iceland and Norway also draw miners with their plentiful renewable energy, offering consistent hash rates with a lower environmental impact.
The concept of mining difficulty, however, highlights PoW’s environmental challenges. The immense energy consumed in trial-and-error computations has led countries like Sweden to push for restrictions, which could reshape future mining regulations. Ethereum's transition to proof-of-stake (PoS) in 2022, slashing its energy use by 99%, shows how sustainable alternatives can thrive and adds pressure on Bitcoin to innovate.
However, PoW remains a crucial element of Bitcoin's security model. The immense energy expenditure required for mining makes it difficult for any malicious actor to alter the blockchain or conduct attacks. This level of security and resilience is difficult to replicate in other systems, and while PoS offers environmental advantages, PoW has shown itself to be robust in terms of maintaining network integrity.
Miners are already adapting by turning to renewable energy sources like hydropower in Canada and solar power in the US Some are even repurposing excess mining heat for industrial uses to improve sustainability.
Quantum computing poses another potential challenge, capable of producing immense mining power that would generate acceptable hashes far faster than current hardware, which could dramatically spike difficulty. While experts say practical quantum computers are still years away, the Bitcoin community is already researching quantum-resistant algorithms to secure the network.
The future of Bitcoin's mining difficulty is balanced between threats and solutions. Whether its PoW mechanism can continue to thrive depends on how it adapts to these challenges.
Did you know? Experts predict that practical, fault-tolerant quantum computers capable of outperforming classical computers in various tasks could emerge around 2035. This would mark a major shift in computing power and technology.
Written by Bradley Peak