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Bitcoin's Difficulty Adjustment

Bitcoin's Difficulty Adjustment
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As previously mentioned, bitcoin is a collection of computer science breakthroughs combined to create the world's first fully decentralized and most secure digital asset.

But I'd like to cover one particular aspect of bitcoin: its difficulty adjustment.

Bitcoin operates on a proof-of-work consensus to verify transactions and generate new blocks on bitcoin's timechain*, the public ledger that timestamps and records all bitcoin transactions inside said blocks.

This is all accomplished by bitcoin miners exerting computational power to solve a complex mathematical problem called a hash. It's equivalent to a digital "lottery"; the first miner to effectively guess correctly wins the newly issued bitcoin.

The BBC actually does a good job explaining this:

So what's to stop all the bitcoin miners from piling in all at once and millions of computers start generating blocks at a rapid pace, or half the miners shut down overnight, making block production and issuing new bitcoins incredibly volatile?

That's where the difficulty adjustment comes in.

During bitcoin's inception, Satoshi Nakamoto added an algorithm to the network's programming that adjusted the difficulty of bitcoin mining based on the total mining activity of the network.

For every 2016th block generated, the mining difficulty increases or decreases to ensure blocks are created around every ten minutes. This allows the network to record transactions and issue coins in a steady, consistent manner - no matter what the fiat price of bitcoin is or how many articles proclaim "BiTcOiN iS DeAd."

Bitcoin is its own spotter in the gym; it can increase or decrease difficulty automatically to ensure its blocks or "reps" are completed promptly and correctly.

But why does the adjustment occur at every 2016th block? The Twitter account, @DocumentingBTC, has a theory:

While we may never know the true meaning behind the 2016th block, we know that the mining difficulty adjustment is an act of genius.

It's a feature that acknowledges human psychology and technological advancements by putting in place a system that keeps the network consistent throughout time.

Mass bitcoin adoption may not be on time, but the network always will be.

*The term Blockchain has become bastardized; this article explains why timechain is a better name for this ledger style.

This article, along with all content and opinions from BTC Examiner, is for educational purposes only and is not financial advice. Please reach out to your financial advisor before making any investment.

This content is for information purposes only. It is not intended to be investment advice. Please seek a duly licensed professional for investment advice.