The Bitcoin mining difficulty index has reached record levels today as the price index experienced a steep incline once again and reached $19.8k at press time. According to cryptocurrency analytics website Glassnode, the difficulty had a net increase of more than 9% today and the overall dedicated computing power has reached 130 EH/s.
The Bitcoin Mining Difficulty
Historically, Bitcoin’s mining difficulty has increased steeply with the rise in the Bitcoin price index itself, often asymmetrically. The 2013 and 2017 Bitcoin bull runs saw the then all-time high mining difficulty records shattered all the time. Now with the cryptocurrency entering a whole new bull run, the mining difficulty is shattering all-time high records once again.
Here is the tweet from Glassnode:
#Bitcoin mining difficulty increased by 8.9% today.
It is now only 4.4% below its ATH.
— glassnode (@glassnode) November 29, 2020
As of press time, Bitcoin’s price index has risen more than 10% in a single day and is now closing in on the all-time high value of $20k fast. If this value is shattered, the mining difficulty is expected to explode further and set new records on the way.
What does Increasing Mining Difficulty do to the network?
A sudden increase in mining difficulty can be challenging for the Bitcoin network as it would mean an increase in transaction fees demand by the miners to keep afloat. Also, it can affect the block creation time, and thus, the transactions can be piled up on top of another causing a sizable backlog. Apart from Bitcoin, other networks are also experiencing a considerable backlog of transactions after hitting their own all-time highs in recent memory.
While Bitcoin has an innate capability to adjust with time and it doesn’t face as much transactional backlog as other cryptocurrencies, it does show some limitations of the networks that need to be fixed in the long-term. The community has to come into agreement about this and move forward from this.
Even with the current bloated fees, the Bitcoin network still offers much lesser transaction fees overall than the conventional payment systems. According to analysts, the average transaction fee right now is around $2.98 which is still quite low. However, with increasing difficulty and uncertainty around the Bitcoin price index, it might increase further in the coming months.
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