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On-chain data shows the Bitcoin Difficulty has seen a sharp increase in the latest network adjustment. Here’s what this means for the blockchain.

Bitcoin Difficulty Has Seen An 8% Jump In Latest Adjustment

According to data from CoinWarz, the most recent BTC Difficulty adjustment made things harder for the miners. The “Difficulty” here refers to a feature built into the Bitcoin blockchain that controls how hard the validators would find it to mine blocks on the network right now.

The metric is controlled entirely by the code that Satoshi wrote in and automatically changes its value about every two weeks, according to network conditions at the time.

The pseudonymous creator of the cryptocurrency had one goal in mind when creating the Difficulty: the network must not deviate from a standard block time of 10 minutes per block.

Whenever the miners are faster than this rate (that is, they mine a block in fewer than 10 minutes on average), the network reacts by raising the metric, in order to slow the validators back down to the intended speed. Similarly, the blockchain reduces the Difficulty if miners are unable to hit the target time.

The latest network adjustment occurred this past weekend. Here’s a chart that shows how the Difficulty changed during it:

The value of the metric appears to have spiked in recent days | Source: CoinWarz

Prior to the adjustment, the Bitcoin Difficulty stood at 116.9 terahashes, but now, it has jumped to 126.2 terahashes. This reflects a very notable rise of almost 8%.

Considering the increase, it would appear that the miners were significantly faster at their task during the last couple of weeks compared to the norm. Miners speed up whenever they add more computing power to their facilities. And indeed, the trend in the Hashrate, a metric keeping track of the miners’ total computing power, confirms that the validators have aggressively been expandingrecently.

The trend in the 7-day average BTC Hashrate over the past year | Source: Blockchain.com

As the above chart from Blockchain.com shows, the 7-day average Bitcoin Hashrate had plummeted earlier, which had caused a steep drop in the Difficulty. But since the low, miners have expanded back up and while the metric isn’t back at the all-time high (ATH) yet, it has come close.

Now that things are difficult for the miners again, though, it remains to be seen how long these upgrades would stick around. Miners that are just breaking-even can get pushed underwater by spikes in Difficulty and they usually respond by disconnecting their machines, causing a drop in the Hashrate.

In related news, the Bitcoin miners have been taking advantage of the breakout to the new price ATH, as analyst Ali Martinez has explained in an X post.

How the holdings of the BTC miners has changed recently | Source: @ali_charts on X

As is…

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On-chain data shows the Bitcoin Hashrate is on the way up again as the Difficulty has gone through a negative adjustment.

Bitcoin Miners Seem To Be Back In Expansion Mode

On Saturday, May 3rd, the Bitcoin network went through its latest Difficulty adjustment and eased things up for the miners, breaking a streak of four consecutive increases prior to that. The “Difficulty” here is a feature built into the BTC blockchain that basically controls how hard the miners find it to mine blocks on the network. This metric’s value changes in response to the pace at which the miners are performing their duty.

The chain automatically adjusts its Difficulty about every two weeks and the rule that Satoshi wrote in for it to base these adjustments off is simple: keep the block time consistent around 10 minutes.

This means that when the miners go through blocks at a rate faster than 10 mins per block, the chain is forced to up its Difficulty. Similarly, it has to ease things up if the validators are being slow, so that they can get back up to the standard pace.

Miners become faster or slower at their task when the total computing power employed by them, known as the Hashrate, changes. As the below chart from Blockchain.com shows, miners were in a phase of rapid expansion earlier, which is why BTC had to up its Difficulty four times straight.

The trend in the 7-day average of the BTC Hashrate over the past year | Source: Blockchain.com

Now, the existence of Difficulty has one major consequence for the Bitcoin miners: no matter how much they invest into their facilities, they can’t collectively pull out more block subsidy than the network allows them to.

“Block subsidy” is the BTC reward that the miners receive as compensation for adding a block to the network. It makes up for the major part of the miner income, with the transaction fees occupying a smaller portion.

Since the Difficulty always brings the miners back to a speed of 10 minutes per block, these validators continue to receive about the same amount of this reward every day, regardless of the hashrate.

In other words, a higher amount of computing power competes for the same amount of revenue as before, whenever the Hashrate goes up (note that this is only true following the next Difficulty adjustment; miners can earn differently from the norm in the in-between period).

This suggests that, in theory, validators who fail to expand proportionately to the global Bitcoin Hashrate increase fall behind the competition and earn less income than before, since the collective BTC income of the miners is constrained.

Such miners who suffer from a revenue squeeze following a Difficulty increase might end up with no choice, but to disconnect from the network. From the Hashrate chart, it’s apparent that the indicator’s value crashed during the…