Bitcoin (BTC) experienced the second largest positive adjustment in difficulty level in over a year, rising by 4.68% to reach a new all-time high. The difficulty of the blockchain is determined automatically by Bitcoin’s core code based on network mining activity.
The chart below depicts the most significant changes, both positive (green) and negative (red) (red.) The change in difficulty has had little correlation with Bitcoin’s price over the last twelve months.
Higher difficulty means a more secure blockchain because it takes more energy to attack the network. Furthermore, as the difficulty of mining new blocks increases in relation to the global hash rate, it becomes more difficult.
The difficulty adjusts in relation to the hash rate of the miners to keep the time to create a new block consistent at 10 minutes. As a result, if a ‘bad actor’ brings miners onto the network to attack it, the difficulty will continue to rise along with the hash rate. The difficulty adjusts every 2,016 blocks, so an attack would have less than two weeks before the network adapted to reduce its impact and control of the network.
Furthermore, increasing the difficulty results in greater consistency in block times. Because of increased competition among miners, the time to mine a new block becomes more reliable with increasing difficulty.
However, the increased difficulty places additional strain on the mining industry. More computing power is required to earn the same rewards, reducing the ROI on mining hardware.
The recent rise in Bitcoin’s price will have allayed many miners’ worst fears, as Bitcoin rewards are now worth more in dollar terms. Following the bankruptcy or restructuring of several miners during the bear market, the price rally provides much-needed relief to miners.