Apr 7, 2022 - Economy

Bitcoin has never been more difficult to mine

Bitcoin mining difficulty
Data: Blockchain.com; Chart: Erin Davis/Axios Visuals

It has never been more difficult to mine bitcoin than it is now.

Context: Mining refers to bitcoin's consensus mechanism, proof-of-work. Miners need to solve a cryptographic puzzle to have the right to add a block to the ledger and earn some fresh bitcoin (currently the reward is 6.25 bitcoins worth roughly $275,000).

Why it matters: Mining difficulty reflects how many miners are trying to win blocks. If more people are trying to win, then more people believe it's going to be worth it to try.

  • When more people try, Bitcoin hikes up the difficulty.
  • The high difficulty now likely means miners are joining the network because they think the price is going to stay where it is or go up.

Be smart: People mine either because the bitcoin price is good or because they found some very cheap electricity (more miners means more electricity used to run the network.)

  • As crypto gets bigger, other forces have also impacted difficulty. That giant drop last year largely corresponds to China booting all its crypto miners.

The latest: This is just another recent milestone for the original cryptocurrency. Last week, it released its 19 millionth bitcoin, leaving only 2 million more to go.

Go deeper