Bitcoin’s mining difficulty hit an all-time high today after a roughly 6% increase, a move that follows a record month in earnings for bitcoin miners as new-generation ASICs come online.
“Difficulty” refers to the relative measure of the amount of resources required to mine bitcoin. This measurement climbs or falls depending on the amount of power consumed (or “hashrate” produced) by the network at a given time. Bitcoin is programmed to adjust its difficulty level every 2,016 blocks, or roughly every two weeks, to ensure that new blocks are mined at a stable rate.
This difficulty is measured on a relative scoring scale where bitcoin launched with a mining difficulty of “1,” the lowest it has ever been. (Difficulty works like Google Search scores in that the scoring system is internal and has no reference point or unit for measurement outside of the networks themselves.)
As of today’s adjustment, bitcoin’s current mining difficulty is 23.1 trillion, according to data pulled from this CoinDesk journalist’s Bitcoin node. Per figures from BTC.com, that is a roughly 6% increase from its last level of 21.8 trillion, which makes it the second-largest adjustment of the year and the fifth upward adjustment in the last six difficulty periods.
The difficulty adjustment is arguably one of Bitcoin’s most important features as it ensures block times remain relatively stable while also preventing a large miner from eating up too much hashrate.
New ASICs online lead to increased difficulty, hashrate
This latest adjustment is a notable bump, Compass Mining CEO Whit Gibbs told CoinDesk, because it’s likely attributable to tens of thousands of new machines coming online that were previously on back order in the ASIC supply chain. ASICs, or application-specific integrated circuits, are chips that are customized for a specific use.
Gibbs said the current adjustment is just a sampler of the flood of hashrate that will come online in 2022 as more back-ordered shipments are filled.
“Today’s moderately large difficulty increase is not surprising, and I expect it’s only a taste of what will come later in this year and into 2022, as delayed machine shipments start arriving and being deployed. The pending flood of hashrate about to enter the market will only continue pushing bitcoin’s mining difficulty higher, which should track with bitcoin’s price,” Gibbs said.
As bitcoin’s price has gone stratospheric, mining investments have been soaring. North American miners such as Hut 8, Marathon, Blockcap and others have used 2021 as an opportunity to aggressively expand operational capacity. As these machines come online, bitcoin’s hashrate and difficulty are rising in step with miner revenues, which hit a record $1.5 billion in March.