‘Mining difficulty’ is a term used in the context of bitcoin mining and its hard forks. It refers to the level of computational difficulty required to successfully solve cryptographic problems and thus be able to register new blocks on a Proof-of-Work blockchain.
The difficulty of mining Bitcoin is automatically and periodically adjusted to ensure that the average time required to create a block remains relatively stable at 10 minutes. The adjustment is based on the total hashrate of the network, i.e. the amount of computing power used for mining on the network.
When more miners join the network and the total hashrate increases, the difficulty of mining increases. Conversely, when miners leave the network, the difficulty of mining decreases.
Here are the 3 main reasons why mining difficulty must be adjusted and maintain a minimum block time of 10 minutes:
- Decentralisation: for information to propagate throughout the network it takes time, so nodes and miners in the world need time to synchronise and reach a distributed consensus
- Managing disputes: In the rare case that two miners manage to mine the same block (because the entire network has not managed to synchronise), the network must have time to choose which one to validate to avoid a fork
- Tokenomics: If the mining difficulty remained the same as the number of miners increased, new BTCs would be created faster and faster, thus causing excessive inflation.