The difficulty in Bitcoin mining achieves an all-time high with over 50 trillion hashes

• The level of difficulty of the Bitcoin mining has exceeded the 50-brillion hash brand for the first time
• A higher level of difficulty means more competition and less profit for the miners, but also more security for the Bitcoin network
• A higher mining difficulty means that higher energy effort is required for Bitcoin mining, which in turn means higher costs for the miners
• mining stocks developed significantly worse last year than Bitcoin

It has never been so difficult to dismantle Bitcoin. Literally. The level of difficulty in Bitcoin mining is increasing and last week exceeded the 50-brillion hash brand.

What is the level of difficulty in Bitcoin mining?

Without the adaptation of the Bitcoin mining difficulty, blocks would be attached to the blockchain faster and faster, the more miners join the Bitcoin network. In this way, the Bitcoin mining difficulty is adapted via an automatic algorithm to ensure that blocks are attached to the constantly growing blockchain in even 10-minute intervals.

The more miner join the network, the more difficult it becomes. In this way, blocks are not discovered faster if more miners join the network. This difficulty adjustment is therefore of crucial importance to ensure that the range of Bitcoin is released at a preprogrammed pace, as the anonymous Satoshi Nakamoto has presented in the Bitcoin White Paper.

This explains why the mining could be carried out on a personal laptop in the early days, since Bitcoin was a niche market and there was so few miners-therefore the mining difficulty was far less. For this reason, you can hear stories of miners that find (or lose) Bitcoin on old hard drives that were almost worthless at the time of mining.

Nowadays Bitcoin has definitely arrived in the mainstream, and the difficulty in mining has increased accordingly. The majority of the mining is carried out by supercomputers, while there are many public companies that perform this task.

What does an increasing difficulty in mining?

The difficulty in mining increases because more and more computing power is being put into the Bitcoin mining. We describe the hash rate as the computing power of the Bitcoin network. If you look at the graphic, this is an all-time high-which intuitively makes sense when you consider that the mining difficulty is also on an all-time high.

for the Bitcoin network as a whole is a good thing. Bitcoin's hash rate is a crucial indicator of the safety of the network. A higher hash rate means that Bitcoin is more resistant to an attack by a malicious actor. Because the higher the hash rate, the more expensive and unplausible it is for an actor (or a group of actors) to take control of 51 % of the network, while Bitcoin could be exposed to a so-called 51 % attack (coins could be issued twice and the accuracy of the blockchain would be doubtful).

However, this also has disadvantages. I explained this in detail last week in a report on Bitcoin mining shares. In summary, it can be said that more hash performance means higher costs for miners, since the increased level of difficulty means that more energy is needed to operate the computers that work on the validation of the transactions on the blockchain. For this reason, the margins of the miners are shortened, as more and more miners join the network (increasing electricity costs do not help either).

"The quick decline in the Bitcoin price of $ 68,000 at the highlight of the bull market at the end of 2021 obviously harmed the mining industry," says Max Coupland, director of Coinjournal. "However, this is by no means the only problem with which the miners are confronted. Since the mining clays have reached an all -time high, greater amounts of energy are required for the breakdown, and at a time when inflation and Russian war have raised energy prices enormously."

The mining industry is therefore extremely volatile, since it not only reacts sensitively to the volatility of Bitcoin itself, but also suffers from increasing energy costs. The following graphic shows how mining stocks have recently developed worse than Bitcoin. It deals with the Valkyrie Bitcoin Miners ETF, which depicts mining companies and was launched in February 2022.

Since the level of difficulty of the Bitcoin mining reaches an all-time high and for the first time the 50-brillion hash mark has been exceeded, it will not be easier for the miners. Ultimately, however, the Bitcoin price will depend. Since block rewards and transaction fees are brought back in the form of Bitcoin and the entire industry is building on this asset, mining companies will go as far as the Bitcoin price allows.

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