Retargeting

Understanding Retargeting in Proof-of-Work Blockchains

Retargeting, also referred to as a difficulty adjustment algorithm, plays a crucial role in proof-of-work blockchains such as Bitcoin.

In the case of PoW blockchains, each block is generated by a miner who solves a series of intricate equations or puzzles. However, the complexity of these puzzles increases with each subsequent block. Miners tackle the puzzle by adjusting a nonce, a unique number used only once, to produce a hash value that is lower than the predetermined hash target for each block.

Miners engage in a competitive race to be the first to solve the puzzle. The miner who successfully solves it first is rewarded with Bitcoin. Once a consensus is reached among the majority of miners, the block is validated and added to the blockchain.

In order to define the hash value of the block and validate the transaction, miners must employ the SHA-256 hashing function until the value is less than the target. If it fails to meet this condition, they need to modify the nonce and repeat the hashing process.

However, the predefined hash target undergoes adjustment every 2016 blocks, which occurs approximately every 14 days. This adjustment process is known as “retargeting.” The purpose of retargeting is to ensure that the average block generation time of 10 minutes is maintained by increasing the difficulty of the puzzle.

Retargeting is determined by dividing the hash target of the first block by the hash target of the current block. This constant retargeting mechanism in PoW blockchains implies that miners today require significantly more computational power compared to the time when Bitcoin was initially introduced in 2009.