Guide to Mining: what is the difficulty?
The previous article underlined the importance of both the cost of hardware and electricity in the mining. Now we are going to investigate the difficulty, another essential concept for those who want to mine bitcoins and other cryptocurrencies.
In a simplified way, we can define this parameter as the resistance to mine a certain crypto.
To an inexperienced eye, it may seem that the value of extraction of a hardware is constant over time, but certainly,it is not. This essentially depends on two main factors. The wear of components over time, which diminish their performance, and the constantly increasing extraction difficulty.
If the algorithm remain the same,why the difficulty increases?
The answer lies in the concept of mining itself.
When we try to extract crypto we enter into competition, for the resolution of a block and then to be paid, with other miners.This implies that, especially in the short term, luck has a significant weight. The higher number of more people thattry to extract a cryptocurrency, the higher the difficulty will be. In other terms, it will be more difficult for us to achieve results.
Equally intuitive is to understand that the increase of miners focusing on one crypto rather than another often relates to its increase in price. Mining Bitcoin, for example, has become a real “challenge” because we are going to collide with big entrepreneurs. Mainly in China, who even rented Boeing 747 to bring faster components to their“Farm”.
Another parameter to keep in mind is that the technological world is constantly evolving. Therefore, buying a hardware that has been present on the market for some time may not be a disadvantage. When a more performing solution comes out, our results could be far lower.