Bitcoin mining difficulty hits all-time high of over 50 trillion hashes.

Key Takeaways

  • Bitcoin mining difficulty has surpassed 50 trillion hashes for the first time ever.
  • A higher difficulty means more competition and less profit for miners, but also more security for the Bitcoin network.
  • Higher mining difficulty means greater energy input required to mine Bitcoin, meaning greater cost for miners.
  • Mining stocks have underperformed Bitcoin significantly over the last year.

Bitcoin mining has never been so difficult. The mining difficulty continues to rise incessantly, surpassing the 50 trillion hash mark for the first time ever last week.

What is Bitcoin mining difficulty?

Bitcoin mining difficulty adjustment ensures that blocks are appended to the blockchain at consistent 10 minute intervals. This adjustment is necessary to ensure the supply of Bitcoin is released at a pre-programmed pace. As more miners join the network, the difficulty rises. In this way, blocks do not get discovered quicker as more miners join the network. The anonymous Satoshi Nakamoto outlined this in the Bitcoin whitepaper. In the early days, mining could be carried out on a personal laptop because Bitcoin was so niche and miners were so few and far between. Hence, the mining difficulty was far lower. Today, Bitcoin is well and truly in the mainstream, and mining difficulty has risen accordingly. Most mining is carried out by supercomputers, while there are many public companies carrying out the task.

What does increasing mining difficulty mean?

Mining difficulty is increasing because more computational power is being put towards Bitcoin mining. The hash rate is what we refer to as the computational power of the Bitcoin network. For the Bitcoin network as a whole, a higher hash rate means more security. However, there are downsides to this too. More hash power means greater cost for miners, as the increased difficulty means a greater amount of energy is required to power the computers working to validate the transactions on the blockchain. This is why miners margins are getting cut into as more miners join the network. The mining industry is hence extremely volatile, as not only is it sensitive to the volatility of Bitcoin itself, but it also suffers from rising energy costs.

The mining difficulty hitting an all-time high means greater amounts of energy are required to mine, at a time when inflation and the Russian war have pushed the price of energy up immensely. The mining industry is hence extremely volatile, as not only is it sensitive to the volatility of Bitcoin itself, but it also suffers from rising energy costs. With Bitcoin mining difficulty hitting an all-time high, racing past the 50 trillion hash mark for the first time ever, things won’t get any easier for miners. However, like always, it will ultimately come down to the Bitcoin price. With block rewards and transaction fees recouped in the form of Bitcoin, and the entire industry built upon this asset, mining companies will go as far as the Bitcoin price takes them.

Mining stocks have underperformed Bitcoin significantly over the last year. The Valkyrie Bitcoin Miners ETF, which tracks mining companies and was launched in February 2022, has underperformed Bitcoin, demonstrating the volatility of the mining industry.

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