On-chain data shows that Bitcoin mining difficulty decreased by over 4% during the latest network adjustment.

Bitcoin mining difficulty has dropped in the latest adjustment

The “mining difficulty” metric tracks how difficult miners would find it to mine blocks on the Bitcoin network. The BTC blockchain undergoes an automatic adjustment approximately every two weeks, changing the value of this indicator.

To know whether this change would be positive or negative, the purpose of the difficulty must first be understood. In short, the difficulty exists as a measure to control the inflation of the asset.

The only way to increase the supply of BTC is to mine new blocks and receive a block subsidy in return. The block subsidy has a fixed value, so the only variable related to the growth of the cryptocurrency’s supply is the speed at which miners hash new blocks.

So if the inflation of assets is to be controlled, this rate must be limited. Satoshi, the creator of the coin, recognized this and came up with the difficulty as a solution.

As miners increase their total computing power (hashrate), they naturally become faster at mining and therefore receive block subsidies faster.

However, this isn’t something the BTC network wants, so it increases the difficulty to slow down miners just enough to reach the desired rate, which is one block every ten minutes.

When miners lose hashrate, the difficulty naturally drops. This allows miners to continue processing blocks at their normal pace, even with lower computing power.

It appears that this latter type of change occurred during the last adjustment, as the graph below suggests.

The data for the BTC mining difficulty over the past year | Source: Blockchain.com

During this latest downward adjustment, the difficulty of the BTC network decreased by over 4%. The chart shows that the adjustment before this one was a sharp positive change, suggesting that the chain was responding to the fact that miners were becoming significantly faster at their task.

The 7-day average mining hashrate chart confirms this, as its value had already risen to a new all-time high (ATH) before the difficulty increased.

Looks like the value of the metric has been on the way down in recent days | Source: Blockchain.com

One consequence of this difficulty is that when new miners join the Bitcoin network, the revenue share of all miners involved decreases. After all, the block subsidy remains the same as before the new miners joined.

The large difficulty spike earlier had of course put pressure on miners, a factor behind the decline the hashrate has seen since its ATH. With the difficulty now seeing a negative adjustment, it is possible that at least some miners would sense improved conditions.

BTC price

At the time of writing, Bitcoin price is trading at around $58,500, down more than 2% over the past week.

The price of the asset appears to have been consolidating recently | Source: BTCUSD on TradingView

Main image from Dall-E, Blockchain.com, chart from TradingView.com