What is a mining difficulty in Crypto-currency context?
Crypto-currency mining involves a certain difficulty of mining. If we are to define the term mining difficulty one could say it is a working mechanism which indicates the difficulty of performing maths calculations to locate the new block.
Why was the parameters of the difficulty being introduced?
Bitcoin mining process as well as many other different crypto currencies remains profitable until the cost of the mined coins remains high and above the cost of mining machinery and electric resources. The difficulty indicator plays an important part for the whole process of crypto mining operations as it defines the calibre of strength needs to be used in the process. In fact the difficulty helps miners to define more sufficient and more advantageous energy resources which supply the profits. Also through difficulty one can control the speed of the emissions
How does the mining difficulty changes?
In the whole bitcoin chain, the difficulty has to be recalculated numerous times for accuracy purposes. In the chain the recalculation process takes place every 2016 blocks and ultimately depends on the time which is needed for finding the previous 2016 blocks. If the block is present every 10 minutes which was what Satoshi Nikamodo implied to support planned emission in value of 21 coins, then according to his method finding of 2016 blocks should take no more than 2 weeks.
If the precious 2016 blocks were found quicker - the difficulty will be increased, if however it took longer to find previous blocks, the difficulty will be decreased. In simple words it could be described as : The more (or less) time was spent finding the previous 2016 blocks, the more reduced the "mining difficulty" degree is.
What affects the mining difficulty?
The degree of difficulty depends on two things: From hashrate net and the time spend in finding the previous blocks.
If the hashrate has grown, then it would mean the new users have joined in for mining, This would also mean that they have switched on their own electrical mining equipment, which is why the calculating power of the net has gone up. Consequently, it will be more quicker to find the new blocks as oppose to the situation where the hashrate was more lower.
From this we can conclude the following:
the higher the hashrate is, the more users are switched in to the mining process therefore less time is needed to find new blocks (difficulty increases), consequently, the lower the hashrate is, the less users there are, and therefore more time is required to mine. (difficulty goes down).
What is Hashrate?
In literal terms one could define this term as the calculative power of mining equipment, which is involved in the process of crypto mining.
Hashrate is manifested in the following decimals:
Harsh/sec(H/s);
Kilohash/sec(KH/s);
Megahash/sec (MH/s);
Gigahash/ sec (GH/s);
Terahash/sec(TH/s);
Petahash/sec (PH/s);
EHkzahash/sec (EH/s)
As the mining process rapidly increases, then it may affect the visibility of certain decimals i.e. hash / sec . To resolve those issues, a much higher energy resources are required, starting from ten hashrates per second.
For instance, the processing power of 10 MH/s would mean that for one second it is capable to generate 10 million different numerical combinations in search of one hashtage which will match with all the initial parameters set up by the system.
What does hashrate depends upon?
Hashrate mainly depends from the set of the key parameters including the chosen alghorythm for crypto mining. For example, some devices would produce the maximum output of inner chain with the alghorythms SHA (Bitcoin, Namecoin, Peercoin and the others) however their efficiency would be reasonably low in the chain using the alghorythm Scrypt (Lytecoin, dogecoin, gridcoin and others).
Also the significant meaning has the specifications of equipment which , which vary depending on the producers. For those who plan to get themselves into mining we would recommend, study the information about the power of the resources which will be help you to choose the most cost effective option.
Also, do not disregard the importance of branding of bitcoin. The more well known it is, the more miners will be attracted to mine it. As previously mentioned the minors switch on their own mining resources, and by doing so they increase their hashrate which in turn affects the mining difficulty.
How's the calculation of the mining difficulty is carried out?
To calculate the mining difficulty, the following formula is used:
difficulty = difficulty_1_target / current_target
where difficulty refers to – mining difficulty and "target" is – 256 decimal number.
Difficulty_1_target can have several meanings. Usually it is a hash in a form of 32 first decimals which are 0, the remaining part consists of letters and numbers: (this is also known as pdiff or pool difficulty).
This formula can be difficulty to understand from the first attempt which is why for a special resources can be used to control the difficulty , where the graph is showing the correlation of Bitcoinwisdom, Coinwarz (multiple choice ), Blockchain.com, Bitcoincity, Etherscan (for ETH).
It is highly recommended to rate the mining difficulty using multiple resources as ,the indicator has a dynamic characteristic traits and therefore is subject to change.
How does mining difficulty affects the profits?
From the graph chart illustrated below it can be seen that from the beginning of 2017 that a rapid growth if the mining
difficulty has commenced. By December 2018 it has slowed down when the marked collapse has happened. At the same time downfall in hashrate could be observed.
Resource: Blockchain.com
Similar picture could be seen amongst other bitcoins. One could state that this is quite a schocking factor giving the fact that fairly recently the experts have rated the average monthly increase of the difficulty amongst the leading altcoins in the size of 8%. However since then the situation has changed, but if one is to refer to these numbers then one could state that with an 8 per cent increase in complexity in one month, the profitability of mining capacity is close to figure of zero after 9 month period.
Thanks for reading!
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