Mining Difficulty (MD) Influences Behavior of Miners on the Bitcoin (BTC) Network

  • Initially, BTC mining was an activity that was designed to be quite inexpensive. However, as the premier cryptocurrency started to gain more and more mainstream media traction, the price of mining Bitcoin started to soar as well.
  • This is also the reason why the currency’s mining community as well as mining difficulty has increased so substantially over the past 4-5 years.

As most of our regular readers are well aware of, Bitcoin is a decentralized peer-to-peer network wherein each separate tx is secured using a SHA26 algorithm. Also, it is worth noting that peers on the network are required to invest a certain amount of their computational power (hash power) to verify each individual transaction.

In this regard, mining difficulty can be used as a useful indicator to determine the amount of effort a miner would have to make in order to find the correct hash function to reach a predefined output.

The Bitcoin ecosystem has a block generation time of around 10 minutes — which basically means that every 600 seconds a new block (containing verified transaction info) gets added to the network.

In order for this block time to be maintained, the mining difficulty quotient of the network has to be adjusted periodically. These days miners with powerful rigs possess the capability to disrupt regular network activities and mine blocks before time.

While there is no clear metric that establishes a direct relationship between mining difficulty and the price of Bitcoin, experts believe that there is surely some symbiotic link between the two.

In closing out this article, it should be pointed out that all through the crypto winter of 2018 — a time when the price of a single BTC token stooped to around the $3k mark — many miners decided to fold up their operations since the activity was no longer profitable.

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