Bitcoin Mining Difficulty Reaches Record Level
The Bitcoin network has reached a benchmark as mining difficulty has reached an all-time high level of 127.6 trillion, a reflection of continuous investment in security on the network. Estimates, however, suggest that the indicator may ease somewhat on the next adjustment on August 9 with an expected reduction by about 3% to 123.7 trillion.
This reduction would bring block production in line with the protocol’s 10-minute goal. Average block times currently sit at approximately 10 minutes and 20 seconds, as of CoinWarz.
Why Difficulty in Mining Matters
- Bitcoin mining difficulty changes every two weeks or so to keep block creation constant. This mechanism of self-regulation is important for two reasons:
- Miner Profitability: Increased difficulty heightens the cost of operation for miners by calling for additional computational strength to achieve rewards for blocks.
- Regulated Supply: Difficulty hinders BTC from being mined faster than is wanted, making its stable and restricted supply more impressive.
Decline Over Long-Term Followed by Short-Term Fall
Data from CryptoQuant reflects that mining difficulty fell at the end of June and during July to 116.9 trillion but maintained its trend of growth later during the month. This longer pattern suggests growing security of the network and sustained demand for mining, weathering short-term volatility.
Stock-to-Flow and the Rarity of Bitcoin
Bitcoin’s stock-to-flow ratio, a comparison of the total supply on hand versus new supply each year, is one of the highest of any asset. With 94% of BTC’s 21 million total supply mined, the ratio approximates 120, and Bitcoin is twice as scarce as gold, which has a ratio of 60.
This scarcity metric can account for why Bitcoin is also a store of value. Unlike silver, with its lower stock-to-flow ratio and tendency to experience supply shocks, Bitcoin’s difficulty adjustment protects against overproduction and resulting price crash.
The Role of Hashrate in Difficulty Adjustments
Bitcoin’s hashrate — the total computing power that protects the network — has a direct influence on difficulty. As more miners join and hashrate rises, difficulty increases to keep block creation near the 10-minute mean. When miners exit and hashrate drops, the network decreases the difficulty.
This seesaw keeps the network safe and creates new supply on the market at an even, predictable pace.
