Difficulty is a characteristic of blockchain network that shows how the mathematical calculation for finding a hash for the new block is hard at the very moment. By the way, you will get reward in size of the exact amount of coins after finding new block’s hash.
What difficulty parameter is used for?
Mining of bitcoin as well as any other coin is profitable only when the price of the prize for finding the new block is bigger than the price of hardware and electricity needed for this. This parameter is very important for miners, because it can help you find out which hardware to use and how powerful it should be. To simplify, mining difficulty is a way to find out about the most energy efficient hardware, sequently to make your profits bigger. What is more, mining difficulty controls new coins’ emission.
How mining difficulty changes?
In the bitcoin network difficulty gets bigger every 2016 blocks and depends on time that was needed to find the previous 2016 blocks. If a new block is mined every 10 minutes, how Satoshi Nakamoto has imagined this to control the emission in size of 21 million coins, then finding 2016 new blocks will take around 2 weeks.
In case, previous 2016 blocks were mined faster — difficulty gets bigger, on the other hand, if it took more time — difficulty gets lower.
The more/less time was needed to find the previous 2016 blocks, the lower/bigger mining difficulty is going to be.
What affects the difficulty?
This parameter is mainly depends on the network hashrate and time needed to find the previous blablabla.
If the network hashrate got bigger, more users have joined it. They have connected their hardware for mining, so the computing power is now increasing. Sequently, you’ll need as much time to find the new block as the network hasrate is.
There are a few interesting things coming from this:
The higher hashrate is -> the more people are working on mining new coins right now -> the less time is needed to find a new block -> the bigger is difficulty.
The lower hashrate is -> the fewer miners are there -> the more time is needed to find a coin -> less hard this process becomes.