Why is the difficulty of Bitcoin mining different this year than in the past?

Bitcoin October 16th This year, Bitcoin price fluctuations have made people sit on several "roller coaster" rides, from a low of just over $3,000 to about $13,000, and then fell to the $8,000 range. But what is puzzling is that at the same time, the difficulty of Bitcoin mining has risen unprecedentedly. Mining difficulty is an indicator that evaluates the difficulty of the computing tasks required to mine new cryptocurrencies and create new blocks on the blockchain.

The difficulty of Bitcoin mining is usually adjusted every two weeks based on the mining power of new miners on the network. From the historical data, although the mining difficulty has generally shown an upward trend since the creation of the Bitcoin network, there have also been brief and significant declines during this period. For example, in December 2018, the difficulty of Bitcoin mining fell three times in a row, with an overall decline of up to 30%.

However, this year, Bitcoin seems to have done nothing at all. According to data from BTC.com, while the Bitcoin mining difficulty indicator has dropped five times so far, the drop has never exceeded 1.18%. This is unprecedented. No drop last year was so low, and in most years we see a single drop of more than 5%.

Of course, 2019 isn’t over yet, but it’s important to note that at this time in 2018, Bitcoin mining difficulty has only dropped once (albeit by 3.45%, which was larger than any of the previous drops in 2019). However, if this trend continues, it would suggest that Bitcoin mining community coins are less sensitive to price fluctuations than ever before.

So the question is, why is the difficulty of Bitcoin mining different this year than in the past?

If you want to understand why, it’s worth reviewing the basics of mining difficulty. The Bitcoin network sets a rule that 2016 new blocks are produced every two weeks, because it’s important to keep this steady pace for the network to function. Blocks are produced by a “mining system” where miners solve mathematical problems, but for miners, they’re more like lottery players, and the mining difficulty is like the chance of winning (naturally very low) provided to each player—every time someone’s “lottery wins,” a new block is created.

Since the Bitcoin network needs to produce blocks at a predictable rate, the difficulty of this "lottery" must change according to the number of all covered "players" (i.e. miners). For example, if miners suddenly leave the network in large numbers, the mining difficulty must be reduced, otherwise the remaining miners will not be able to produce new blocks at the rate required to keep the network running.

Although the complexity of the Bitcoin mining system is much more complicated than described above, following this basic principle can show that the trend of increasing Bitcoin mining difficulty this year is likely a bullish sign for prices.

Investors come and go, prices fluctuate, but we can at least see that interest in Bitcoin is clearly on the rise this year. More importantly, the rise in Bitcoin mining difficulty has been more stable this year than ever before.

This article is compiled from longhash