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Bitcoin mining difficulty

In the process of spreading the crypto currency and the development of the market as a whole, such activity as mining became very popular. Meanwhile, newly-minted miners don’t always fully possess the information necessary to make the extraction of currency a profitable occupation. In this article we will consider the concept of the complexity of mining the currency using Bitcoin as an example.

By itself, the mining of a digital currency is the process of a mathematical solution of a block in the blockchain. Mathematical actions are carried out with the help of special equipment and in reward for the decision the miner receives coins of the extracted currency.

But, since all crypto-currencies have a deflationary character, their emission is strictly limited by the program code. For example, the total number of Bitcoin coins is 21 million. In addition to this, the time for which all coins are to be mined is also laid down in the program code. The last
Bitcoin will be produced only in 2140. It was for compliance with the specified parameters that the developers introduced the concept of complexity.

The complexity indicator is a number that shows how difficult it is to solve the mathematical task of the block and receive a reward.

For example, for bitcoin, the complexity will be change so that the block decision takes about 10 minutes, regardless of how many miners took part in the mining. Mining complexity correction takes place every 2016 blocks or 14 days (10 minutes each). And if this number of blocks is solved faster, the system will automatically increase the complexity. The reverse situation is also true, when the miners did not manage to get 2016 blocks in two weeks. Then the complexity will automatically decrease. This is all done in order not to get out of the planned emission rates.

Proceeding from the above, the complexity will depend on two main parameters:

  • Network hashreit (total computing power, used for production).
  • Time spent on the extraction of 2016 blocks. That is, the more people take part in the extraction of currency, or the more powerful the equipment will be use the miners, the greater the complexity will increase.

For clarity, consider the graph of bitcoin complexity. We see that over the past year, the complexity of mining the most famous currency has increased thousands of times.

bitcoin difficulty

First of all, this was due to the incredible growth of the market and, accordingly, the price of the crypto currency. To the mining of bitcoins, a huge number of miners joined, thereby increasing complexity.

Another factor in increasing the complexity of bitcoin was the release of more powerful equipment, specifically focused on the extraction of crypto currency.

Naturally, each crypto currency will have different complexity. At the moment Bitcoin is the currency with the highest complexity of mining, which is due to its popularity. However, the complexity of production is directly related to profitability. According to experts, the complexity of mining the most popular crypto-currencies grows by an average of 8% with each month. Consequently, approximately by 8% the profitability of coin mining is reduced every month.

This means that in order to profit from the production of crypto-currency gold, the miner must have incredibly powerful and expensive equipment. Therefore, if you want to seriously engage in mining, perhaps the best solution will be to look at less popular and expensive currencies. Or join the pool for mining.

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