Difficulty

Understanding the Concept of Difficulty

In blockchain systems that rely on proof-of-Work, such as Bitcoin, the process of adding fresh blocks to the chain is accomplished through a process known as mining. Mining involves the solution of complex cryptographic puzzles.

The Bitcoin blockchain is specifically designed to incorporate a new block into the chain approximately every 10 minutes. However, as anticipated in the Bitcoin white paper, the speed at which these puzzles are solved will gradually decrease over time due to advancements in hardware technology.

This phenomenon can be observed in the evolution of mining technology, which has progressed from traditional desktop or laptop computers to more powerful GPUs, and now to specialized ASICs that are utilized in large, regulated farm environments.

In order to account for the increasing speed of hardware, the difficulty level of the cryptographic puzzles is adjusted accordingly. This difficulty level is regularly updated to ensure a specific number of blocks are mined per hour.

The increase in difficulty on the Bitcoin blockchain is truly remarkable. When Satoshi Nakamoto, the creator of BTC, mined the very first block (known as the genesis block), it is believed that he did so using a regular desktop computer. At that time, the difficulty level was measured as 1. Currently, the estimated difficulty level for Bitcoin is around 20 trillion.

Successful miners in the Bitcoin network are rewarded with newly minted coins. However, it is important to note that Bitcoin has a maximum limit on the number of blocks that can be mined. Once this limit is reached, no new coins will be created. Nevertheless, mining power, or hash power, will still be required for the network to function effectively. To incentivize miners, the rewards for mining will undergo a change. Instead of receiving coins, successful miners will receive a portion of the transaction fees on the network.