It seems every time you understand something about cryptocurrency 3 other things pop up that confuse you. To all my miners out there the difficulty of the coin you’re mining might be the bane of your existence. I had a mining contract with Genesis mining( use the promo code eg5oim to get a discount) that was deemed “no longer profitable” and subsequently canceled because the difficulty level went higher(I thought higher at least) than the production of my hashpower what difficulty was. I thought the difficulty went up as the available supply went down. Oh how wrong I was
To begin to understand this we must know two crucial definitions: Target and hash. No. Not the store and the drug although both of those are pretty good. A hash or hash function is a mathematical algorithm that maps data of arbitrary(super huge) size to a bit string of a fixed size. In layman’s terms, it crunches large amounts of info(in our case groups of transactions) into a relatively short number string. The name of the algorithm that Bitcoin uses is SHA-256. This algorithm produces verifiable yet random numbers using a predictable amount of computing power. This is where the target comes in. A target is a 256 bit encryption number that all bitcoin clients or developers of various bitcoin blockchain tech share. If the hash your computer produces contains a number equal to or smaller than the target your hash is accepted. If it is higher you generate a nonce and rejected. It’s not quite this simple but think of the hash/nonce as generating a 1 or a 0. Most of us are somewhat familiar with binary code(computer language) even if we only know that’s how Neo sees the matrix.. 1’s are accepted by the network. 0’s aren’t accepted. Every 2016 blocks(or about every 2 weeks but it can vary a little) all of the bitcoin clients examine how long it took to generate blocks. All of the 1s and 0s if you will. Each time it is reviewed the difficulty goes up or down a bit based on it it took shorter or longer to generate blocks. Yes the difficulty can go down and contrary to conventional thinking the lower the difficulty the harder it is to crack a block
Each coin shares these same principles but uses a different algorithm. Some of us noticed a change in the difficulty when Bitcoin Cash came on the market. Bitcoin Cash was able to be mined by CPU and was much more attractive to a small-time miner Hard forks like these made switches in who was mining what and therefore made changes in how often blocks were being cracked. Example. Let’s say 100,000 Ether miners all of a sudden switched to ZEC because the algorithms were similarly compatible with their hardware but they had higher difficulties and lower thresholds to crack blocks. Ether would see blocks being cracked in longer times as their network hashrate dipped. Their difficulty would adjust at the next readjustment period.
The further you dive into cryptocurrency the more complicated you realize things are. But you don’t have to fully understand everything about something to use it. We all drive cars but how many of us can explain in minute detail how all the parts of an internal combustion engine works? We’re always looking for user-friendly tools like Minergate to get people rolling You can get started in crypto without knowing all the ins and outs. But by all means, keep coming back to learn more and send us your questions so we know what content to create. Your feedback is what helps this process the most
If most of this went over your head you may want to back up to the basics of bitcoin mining. I’ll be writing a tutorial on this soon. Sorry, I’m not going sequentially. I’m writing these as different issues are posed to me. See ya next time
