KEY POINTS

  • Bitcoin mining difficulty spiked by 15%, making it hard for miners with old equipment to compete for block rewards
  • Mining difficulty is adjusted roughly every 14 days
  • Mining difficulty is expected to increase despite Bitcoin trading sideways in the short-term

Bitcoin’s mining difficulty increased the largest Tuesday (June 16), making it much harder for miners to compete for block rewards on the Bitcoin blockchain.

Bitcoin miners use a great amount of computing power to mine Bitcoins. While it was easier to mine Bitcoin in 2009, today, it often requires a mining pool -- several mining rigs working together to mine the cryptocurrency. Most Bitcoin mining farms, as they are referred to, are in China. As competition to mine block rewards became more difficult, mining firms use newer equipment for the process. 

This is where the difficulty adjustment becomes important; to ensure the block interval remains 10 minutes, the mining difficulty is adjusted every 2,016 blocks or around 14 days. When difficulty becomes easier, miners might choose to plug-in to mine and compete for rewards. The more miners there are, the more the difficulty will increase in the next 14 days. 

This week it stands at 15.78 trillion, a sharp 15% increase in difficulty since January 2018. At that time, Bitcoin just reached its all-time high the month before.

The steeped difficulty adjustment this week might be because of the lower mining difficulty after the Bitcoin halving May 11. Because the reward per block produced is reduced to 6.25 BTC vs. 12.5 BTC previously, many miners may have powered off their equipment because of the lower reward. Bitcoin mining, after all, uses electricity, and the rewards from mining should at least be able to pay for its continuous operation. 

When difficulty dropped immensely on May 20 and June 4, many miners thought others stopped operating and thereby took advantage of the opportunity to mine again. This led to more miners coming back, which ultimately led to the increased difficulty adjustment this week.

If mining difficulty continues to increase, it will be more difficult for miners with older equipment to compete. Mining Bitcoin involves solving a complicated math problem that all miners compete to do. Whichever miner (or mining pool) solves the problem gets the block reward. Naturally, newer types of equipment are faster in this regard.

This sentiment is echoed by Ethan Vera, co-founder and CFO of Luxor mining pool. “With the value of hashrate set to decrease to $0.075 cents per TH/s, not many of the existing, old-gen equipment will turn back on,” he told Coindesk.

Vera also said even if Bitcoin’s price is expected to go sideways in the coming weeks, mining difficulty will continue to increase “as more older generation miners go offline and newer generation ones come online.”

Bitcoin mining operations can be massive, and consume large amounts of electricity Bitcoin mining operations can be massive, and consume large amounts of electricity Photo: AFP / Lars Hagberg