Bitcoin Mining Difficulty Has Seen A Sharp Increase In Latest Adjustment

On-chain data shows the Bitcoin mining difficulty has gone through an increase of more than 10% in the latest network adjustment.

The latest network adjustment has seen the Bitcoin mining difficulty increase by more than 10%. This difficulty serves to regulate the inflation of BTC by controlling the rate at which new blocks are generated.

Bitcoin Network Difficulty Sees a Substantial Increase in Latest Adjustment

The “mining difficulty” is a crucial aspect of the Bitcoin blockchain, designed to regulate the rate at which new blocks are generated and, subsequently, the inflation of the cryptocurrency. While BTC has a capped supply, it has yet to be fully realized, leading to an ongoing increase in the asset's supply.

Miners are responsible for “minting” new BTC by successfully solving blocks on the network and are compensated with block subsidies. These rewards typically come attached with a fixed BTC value, except during Halving events, which occur roughly every four years and permanently reduce the rewards by half.

Given this setup, the only way to ramp up the token's production rate is to generate blocks at a faster pace. To achieve this, miners can collectively increase the network's hashrate by adding more computing power.

However, this effect is short-lived due to the mining difficulty. In a hypothetical scenario where the BTC network lacked this difficulty adjustment, miners could continuously increase the hashrate to mint the asset at an ever-faster rate, ultimately rendering the coin susceptible to high inflation and a decline in value.

Fortunately, Satoshi foresaw this issue and programmed the Bitcoin blockchain to target a standard block production rate of 10 minutes per block.

If the miners were to deviate from this rate—either by decreasing their hashrate or increasing it—the BTC network would automatically adjust the difficulty to counteract the change in hashrate. These adjustments occur approximately every two weeks.

While maintaining a constant block production rate does not directly reduce inflation (which would require decreasing the token supply to make the coin scarcer), it does make the inflation rate more predictable.

The role of reducing the production rate is fulfilled by the Halving event, which occurs at set intervals to tighten the production rate and, subsequently, the coin's scarcity.

The latest Bitcoin network adjustment took place recently and involved a substantial increase in difficulty, as illustrated in the chart below.

Bitcoin Hashrate 7-Day Moving Average Hits New All-Time High

This sharp difficulty adjustment to a new all-time high (ATH) strongly suggests a rapid increase in hashrate, which is further confirmed by the chart displaying the 7-day average hashrate.

As evident in the graph above, the 7-day average Bitcoin hashrate recently set a new record. This substantial surge in computing power indicates that miners were generating blocks at a faster rate than intended by the network. To counter this and slow down the miners to the standard pace, the network increased the difficulty by more than 10%.

BTC Price at the Time of Writing

Bitcoin is currently valued at around $64,000, having faced a drop of nearly 3% over the past 24 hours.