Bitcoin

Bitcoin difficulty update

Bitcoin mining bitcoin difficulty update two main purposes. The other purpose is to create new bitcoins. The total number of bitcoins that will ever be mined is limited to 21 million. Moreover, the bitcoin protocol determines a time horizon over which the bitcoins will be created.

210,000 blocks or approximately every four years. If everybody could easily mine new bitcoins, inflation would be the result. Bitcoin difficulty exists to ensure a limited bitcoin supply. This does not mean there could be no inflation for bitcoin. Bitcoin mining gets more difficult with an increasing computing power in the network. The protocol always makes sure the pre-defined trajectory of bitcoin creation is kept.

The computing power is measured in hashes per second. To understand what that means, the process of mining needs to be explained in further detail. When a computer mines bitcoins, it tries to calculate a hash which is the block’s header. The hash starts with a certain number of zeros. The target is a 256-bit number and is therefore extremely long. All bitcoin clients know the target. It gets more difficult to mine bitcoins, the more leading zeros the hash has got.

If the number of zeros is larger, you have to roll the dice again. The more dices are rolled at the same time, i. The probability also increases if the computing power of a single machine is increased. It simply resembles throwing more dices at the same time. Since mining difficulty is really high today, single miners are very rare. This is because every second new mining rigs can be added to the network. The bitcoin protocol determines the recalculation frequency of the target.

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