Bitcoin mining difficulty set to reach record high
Bitcoin mining difficulty set to reach record high
It has become even more difficult to mine Bitcoin. Bitcoin’s mining difficulty is set to surpass the 40 trillion mark for the first time this weekend. In accordance data on the chainmining difficulty will increase by an estimated 10% from 39.16 trillion to 43.2 trillion.
Bitcoin mining difficulty set for record highs
The mining difficulty expresses the number of iterations miners must perform to obtain the hash of a Bitcoin block. Therefore, the higher the number, the more difficult it is to solve a block which leads to lower profitability in mining.
This calculation is updated every two weeks, and increased difficulty is attributed as more miners enter the Bitcoin network. Miners will receive reduced BTC production over the next 12 days, or approximately 2,016 blocks, due to increased mining difficulty.
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Mining problems have steadily increased in recent months due to the rise in the price of Bitcoin. At the previous all-time difficulty on January 16, 2023, the Bitcoin network peaked at 39.35 trillion, but experienced a decrease of 0.49%.
Since then, the difficulty has remained around 39 trillion. During this period, the Bitcoin hash rate experienced a significant increase and reached an all-time high on February 16, 2023.
Price resurgence has attracted miners
For much of 2022, the bear market that bitcoin (BTC) went through caused many miners on the network to take losses. Some miners had to diversify to maintain their activity, while others stopped mining and sold their equipment. This of course led to low bitcoin mining difficulty and hash rate.
However, things have changed in 2023. First, the market price of Bitcoin has increased by more than 40% from the lowest point recorded in November 2022 ($15,670). This has attracted the attention of miners looking to take advantage of the trend.
Second, the rise of Ordinal’s non-fungible tokens (NFT) on the Bitcoin network has led to increased activities. Due to the larger transactions incurred by these NFTs, mining fees have returned to attractive levels.
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Entries for Ordinal’s NFTs are made in a part of the Bitcoin transaction called Witness. For this reason, they pay a minimum commission of 1 sat/byte, about a quarter of what transactions pay to send bitcoins (BTC).
But because Ordinals transactions are heavier than “regular” transactions, they end up paying higher fees, often over $20. This of course depends on the weight of the transaction and the priority of it.
To provide some context, miners have generated more than $800,000 in fees from Ordinal NFT in less than a month, according to data from Dune analysis.
The development of Ordinal NFTs has not been without scrutiny as critics believe it causes congestion on the Bitcoin network leading to high transaction fees. Nevertheless, these factors have attracted miners and led to increased mining difficulties.
Bitcoin price
At the time of writing, Bitcoin is trading for $23,300.
Featured image from Unsplash.com, charts from Dune Analytics and TradingView
