Mining difficulty reaches all time high as industry nears 2 millionth Bitcoin

Mining difficulty, also known as network difficulty, reached an all-time high of 28.586 trillion on Friday as the Bitcoin network churned out its 19th millionth Bitcoin. Mining difficulty is a measurement of how difficult it is to mine a new block on a blockchain network. 

The growing value of Bitcoin has attracted more miners/nodes trying to mine bitcoins using application-specific integrated circuit (ASIC) miners designed specifically for mining cryptos. In proof-of-work-based crypto networks, miners compete with each other to discover blocks at any given time. Competition to mine the same number of blocks increases the compute power, also known as hash rate. 

The Bitcoin network is designed to automatically compensate for the increase in hash rate by making the mining process more difficult. According to blockchain.com, this is done by adjusting every 2016 block (approximately every two weeks)  to ensure the average time taken to discover new block remains 10 minutes. 

If the network sees an increase in mining activity and use of mining farms, the difficulty is automatically increased. Similarly, if the mining activity drops, the network also reduces the mining difficulty, making mining easier. The increase in mining difficulty indicates that mining activity has also increased. 

Without this adjustment of difficulty, miners would mine all the remaining blocks very quickly given the computing power they have at their disposal. According to industry estimates, with the network difficulty in place, the remainder of the 2 million cryptos out of the 21 million will be mined by 2140.

Though higher difficulty makes the network more secure against attacks, it also means that miners will use more computing power to mine the same number of blocks. This would lead to an increase in the consumption of electricity that is largely generated by fossil fuels. 

The environmental impact of crypto is a major concern for governments in various countries that are yet to make up their mind about granting legitimacy to cryptos. Impact on environment is one of the reasons why mining has been banned by many countries including China. 

To address this problem, some crypto networks have embraced the proof-of-stake consensus protocol instead of proof-of-work. In proof of stake, miners stake their own cryptocurrencies in order to join and validate transactions, resulting in lower energy consumption.