Profile

What is bitcoin difficulty?

What is bitcoin difficulty?

Why does Bitcoin have a "difficulty" and what does this difficulty represent? How is this number calculated and why is it important? In this video, shot in the ...

Transcription

What's up, party people? Chris DeRose here, Community Director of the Counterparty Foundation. Today's question that I'd like to answer is, "What is Bitcoin difficulty or what is the Bitcoin difficulty?" So as you may or may not know, Bitcoin is mined by miners. They perform a number of calculations that are fairly intense calculations. It's called a double-SHA256 calculation. That itself is a whole another video. But in doing these calculations, we need to keep the network at a certain level of equilibrium amongst the miners.

An equilibrium, in the sense that the network needs to be calibrated to accommodate the size of all the people that are contributing. This calibration is in the form of the difficulty, the difficulty of the calculation. The difficulty is calculated every 2,016 blocks, which is roughly two weeks. And every two weeks, a re-calibration is done of the network. The calibration is based off of the amount of time it takes, per block, to mine that block in the prior two weeks. Based on what that average is, if it's too high, meaning it's taking longer than 10 minutes.

Or if it's too low, meaning it's taking less than in 10 minutes per block, that difficulty gets adjusted. The difficulty, itself, is a number. It reflects the precision on the hash. So when a hash is computed it's, roughly speaking, an attestation of the amount of work that went into producing the block. It is a calculation that requires that a certain amount of these double-SHA calculations be done in order to prove the block. Roughly speaking, and there's a little bit to this but the difficulty is almost as simple as how many zeroes there are, in terms of precision, before you get to the numbers that we validate.

I'm paraphrasing here, but if there's a high difficulty level, we need to be within, let's say, 0.0000001% accuracy on this calculation. Or if there's a low difficulty, maybe 0.1% difficulty. Over time, the difficulty is grown at an exponential rate. This was something that was purely designed in the system.

Satoshi knew that Moore's law, which is a very common law in computer science, has to do with transistor density that shifts are fabricated. That law dictates the speed at which networks increase. And, because of that, it is at an exponential rate that our computer chips get faster. And because of that, the difficulty itself is reflected that Moore's law efficiency. That's really how it was designed. It's a really cool feature of the Bitcoin network.

And when I first read it, my mind was blown because it was never something that you saw used in an economic capacity. It was really smart. So, Satoshi, if you're watching this, I think that's one of the many genius things that you've done. Very impressive. But yeah, that's what difficulty is. That's what difficulty provides for the Bitcoin network.

And it is a throttle of sorts on the rate at which we can produce blocks. So if you have other questions, feel free to ask me. You can tweet me @derosetech. You can email me at chris@chrisderose.com. And, if you like this video, subscribe to the channel.

Peace out, party people.