On-chain data shows that Bitcoin Difficulty has seen its third consecutive increase in the network’s latest correction. Here’s what this means for BTC.
Bitcoin Difficulty Just Set a New All-Time High
According to data from CoinWarz, BTC difficulty has seen a positive change during the recent network maintenance. “Difficulty” here is a metric that tracks how hard Bitcoin miners will find it to mine on the network.
The value of this indicator is refreshed every few weeks without human intervention; the code that Satoshi wrote automatically makes the changes.
The latest such correction took place during the past day and has caused difficulties for the up-chain. Below is a chart showing how the value of this metric has changed over the past few months.
The value of the metric appears to have seen a sharp surge recently | Source: CoinWarz
The graph shows that Bitcoin’s difficulty has also seen jumps during the previous two corrections, but this latest increase of more than 6% is the largest of the three.
As for why the chain is increasing its Difficulty recently, the reason lies in the trend that Hashrate has been observing. “Hashrate” is a measure of the amount of computing power that all miners have connected to the Bitcoin blockchain.
Here is a chart from Blockchain.com showing the trend in the 7-day average price of this BTC index over the past year:
Looks like the value of the indicator has been following an uptrend in recent weeks | Source: Blockchain.com
The graph shows that the 7-day average of Bitcoin Hashrate has been rising for a while now and is hitting new all-time highs (ATHs). The uptrend has been particularly sharp over the past few weeks, indicating that miners have become more aggressive with their expansion.
Now, what does this have to do with difficulty? However, one of the main characteristics of the network is that its blocking time is always equal within 10 minutes.
Whenever miners add power, they speed up their mining work and extract blocks at a faster rate than this rate. To cope with this speed increase, the network makes it difficult for miners to perform their tasks, setting them back to 10 minutes per block.
The Hashrate of the cryptocurrency has seen an explosion recently, so the chain only responded as designed by appropriately increasing the Difficulty to a new record.
But why did the creator of BTC add this limit at all? The block subsidy, which serves as the only way to generate more BTC, can be prevented by limiting how quickly miners can pass through blocks and earn these rewards.
Supply continues to grow, but at least the existence of the crisis means that inflation only occurs at a predictable pace.
BTC price
Bitcoin declined below $67,000 yesterday, but the asset bounced back quickly as its price returned to $69,700.
The price of the coin seems to have surged over the last 24 hours | Source: BTCUSDT on TradingView
Featured image from Dall-E, Blockchain.com, chart from TradingView.com
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