Difficulty is a relative value that represents the amount of effort that miners need to generate to solve new blocks and claim their block rewards. It’s conceptually similar to Google’s search engine score that adjusts search rankings on a 0-100 scale overtime on internal metrics.
Mining difficulty adjusts periodically to regulate how quickly miners are adding new blocks. Higher difficulty levels mean more effort is required. Lower difficulty means adding blocks is relatively easier.
How is difficulty calculated?
Difficulty adjusts every 2016 blocks, or roughly every two weeks. Each adjustment’s target is based on a comparison of the amount of time required to solve the prior 2015 blocks with the two-week target time.
- Difficulty drops if solving the latest set of 2015 blocks took longer than two weeks.
- The opposite happens if the process took less than two weeks.
The time spent mining new blocks varies based on changes in Bitcoin’s hashrate, an estimate of how many miners are competing to get paid for adding new blocks to the network’s record of transactions.
When more miners are mining, bitcoin’s hashrate increases, which causes blocks to be solved more quickly and a subsequent increase in difficulty. When fewer miners are mining, the hashrate drops, new blocks are added at a slower pace, and difficulty often drops.
Bitcoin’s difficulty started at 1. Although it fluctuates upward and downward regularly, it can never drop below its initial level of 1. Because the difficulty is so high, miners have long since abandoned mining bitcoin with CPUs and GPUs, instead building mining farms for ASICs designed for mining.