It makes it harder to mine Bitcoin. Bitcoin mining difficulty is set to surpass the 40 trillion mark for the first time this weekend. according to on-chain datamining difficulty will increase by approximately 10% from 39.16 trillion to 43.2 trillion.
Bitcoin Mining Difficulty Set To Record Level
Mining difficulty refers to the number of iterations miners must perform to obtain the hash of a Bitcoin block. Therefore the higher the number, the more difficult it is to solve the block resulting in lower mining profits.
This metric is updated every two weeks, and increases in difficulty as more miners join the Bitcoin network. Miners will receive reduced BTC production in the next 12 days, or approximately 2,016 blocks, due to increased mining difficulty.
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The difficulty of mining has increased steadily in recent months as the price of Bitcoin has risen. At the previous all-time difficulty on January 16, 2023, the Bitcoin network peaked at 39.35 trillion but experienced a reduction of 0.49%.
Since then, the difficulty has remained around the 39 trillion mark. During this period, the Bitcoin hash rate witnessed a significant increase and peaked on February 16, 2023.
Resurgence Resurgence Has Attracted Miners
For much of 2022, the bear market that bitcoin (BTC) experienced caused many miners on the network to experience losses. Some miners had to diversify to survive, while others stopped mining and sold their equipment. This, of course, leads to low bitcoin mining difficulty and hash rates.
However, it has changed in 2023. For the first time the market price of Bitcoin has increased by more than 40% from the highest point recorded in November 2022 ($15,670). This has attracted the attention of miners who want to benefit from the trend.
Second, the rise of Ordinals non-fungible tokens (NFTs) in the Bitcoin network has led to increased activity. Due to the larger transactions made by these NFTs, mining fees have returned to attractive levels.
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Entries for Ordinals NFTs are made in a section of Bitcoin transactions called Witness. For this reason, they pay a minimum commission of 1 sat / byte, about a quarter of the transaction paid to send bitcoins (BTC).
However, since Ordinals are more transaction heavy than “regular” ones, they will pay higher fees, often more than $20. This, of course, depends on the weight of the transaction and the priority given.
To provide context, miners have generated more than $800,000 in fees from NFT Ordinal in less than a month, according to data from Dune analysis.
The development of Ordinal NFTs is not without oversight as critics believe it causes congestion in the Bitcoin network resulting in high transaction fees. However, these factors attract miners and cause mining difficulties.
Bitcoin price
At the time of writing, Bitcoin is currently trading at $23,300.
Featured Images from Unsplash.com, charts from Dune Analytics, and TradingView