Difficulty curve bitcoin

The highest possible target difficulty 1 is defined as 0x1d00ffff, which gives us a hex target of. It should be noted that pooled mining often uses non-truncated targets, which puts "pool difficulty 1" at. Here's a fast way to calculate bitcoin difficulty. It uses a modified Taylor series for the logarithm you can see tutorials on flipcode and wikipedia and relies on logs to transform the difficulty calculation:. To see the math to go from the normal difficulty calculations which require large big ints bigger than the space in any normal integer to the calculation above, here's some python:.

Current difficulty , as output by Bitcoin's getDifficulty. There is no minimum target. The maximum difficulty is roughly: The difficulty is adjusted every blocks based on the time it took to find the previous blocks.

At the desired rate of one block each 10 minutes, blocks would take exactly two weeks to find. If the previous blocks took more than two weeks to find, the difficulty is reduced.

If they took less than two weeks, the difficulty is increased. The change in difficulty is in proportion to the amount of time over or under two weeks the previous blocks took to find.

To find a block, the hash must be less than the target. The offset for difficulty 1 is. The expected number of hashes we need to calculate to find a block with difficulty D is therefore. That means the hash rate of the network was. At the time of writing, the difficulty is Retrieved from " https: One could call this a free cash flow FCF positive miner. This could help ensure the mining hashrate and Bitcoin network conditions are more stable than they otherwise would be.

When the mining difficulty increases, the cost for the miners to produce one Bitcoin should shift upwards. Incidentally this is a not necessarily a parallel upward shift in costs.

Each miner may have a different breakdown between fixed and variable costs. The fixed costs should remain unaffected by a difficulty adjustment, such that miners with a higher proportion of fixed costs, perhaps due to very low electricity charges, may comparatively benefit from an upwards difficulty adjustment, compared to its peers. This dynamic is different from traditional resource mining e.

If the gold spot price changes, this neither impacts the variable or fixed costs, of producing one troy ounce of gold. Therefore in gold mining, the actions of other miners cannot directly impact the costs in any one mine, whilst in Bitcoin difficulty adjustments, driven by the actions of other miners, can directly impact the cost per unit production. This dynamic is different in Bitcoin mining.

As a result of this, in Bitcoin, the mining industry could be more stable than for gold mining. We have explained how some Bitcoin miners can comparatively benefit from a lower Bitcoin price, however it may also be possible for some miners to get an absolute benefit from a falling Bitcoin price, in the short term.

If the spot price of Bitcoin falls, initially all miners take a parallel revenue hit per Bitcoin produced, just like in traditional mining. However, should miners on the right hand side of the cost curve leave, depending on the shape of the costs curve, some miners could actually see the absolute level of their profits increase.

In some ways this could make the Bitcoin mining industry earnings more resilient to price crashes, but in other ways it could produce perverse incentives. The difficulty could then adjust downwards and miners on the left hand side of the curve could, in theory, increase the absolute level of their profits. A similar analysis could be conducted, but instead of miners leaving, it could apply to the absence of miners entering the market.

Contrived mining industry cost curve variable costs. Therefore, perhaps some miners may benefit from falling Bitcoin prices, in some time periods.

Who knows, we may already be seeing this phenomenon, to some extent, with larger lower cost miners wanting the price to remain low such that new miners do not enter the market. Although this is probably somewhat unlikely. Skip to content Abstract: A two week period is split into sections of 10 minutes. If more than blocks were mined in a two week period, mining becomes more difficult, such that if the hashrate remains constant, blocks are expected to be found every 10 minutes in the next two week period.

If fewer than blocks were mined in a two week period, mining becomes less difficult, such that if the hashrate remains constant, blocks are expected to be found every 10 minutes in the next two week period. The maximum adjustment in any one period is a factor of 4 i. Mining Equilibrium and the Misconception This Means Miners Cannot Make Profits In theory, the difficulty adjustment keeps the system in check, in an equilibrium position, when external inputs change.

For example consider the following scenario of a sudden increase in the Bitcoin price: The Bitcoin price increases Mining profitability increases, since miners are rewarded in Bitcoin More miners join the network to take advantage of higher profit margins and there are limited mining entry barriers The network hashrate increases and the average block interval falls below 10 minutes After a few weeks, the mining difficulty increases and therefore mining profitability decreases The average block interval increases back up to 10 minutes The same kind of logic can be applied to an increase in Bitcoin transaction fees or the release of new more efficient mining hardware.

The Gold Mining Industry as an Analogy The below chart illustrates total world gold mining production, by mining company.