The Bitcoin network has experienced a significant increase in mining difficulty, with a rise of over 10% in the most recent adjustment. This mechanism is crucial for controlling the rate at which new BTC is introduced into circulation. Although Bitcoin’s total supply is capped, new coins are continuously minted by miners who solve blocks and earn block subsidies as rewards.
These subsidies maintain a fixed value in BTC, except during Halving events, which occur approximately every four years and reduce the rewards by half. To increase Bitcoin production, miners can enhance their total computing power, known as “hashrate.” However, this boost in production rate is short-lived due to the difficulty adjustment mechanism, which aims to maintain a steady block production rate of 10 minutes per block.
Without this difficulty adjustment, a rise in hashrate would lead to faster BTC production, potentially causing high inflation. The recent adjustment, which set a new all-time high in difficulty, indicates a substantial increase in hashrate. The 7-day average hashrate data confirms this surge, showing that miners were generating blocks at a much faster rate than intended.
As a result, the network increased the difficulty to slow down block production to the standard rate. Currently, Bitcoin is trading around $64,000, having decreased by nearly 3% in the past 24 hours.
