There are a loterijlot of talks out there on the subject of cryptocurrency mining and trading. A typical question for any beginner would be something like, “which ASIC to buy or which mining equipment to build,” and the response is: “Take a look at the growing difficulty of the network and don’t even think about getting into this business!”
What is Network Hashrate?
Let’s have a look at the hashrate and difficulty of a Musicoin blockchain (similar to Ethereum, same spil a Dagger Hashimoto algorithm). The values are smaller than you think, so I hope it will be lighter for you to understand the idea this way.
Each cryptocurrency network has a “block time” parameter. Ter Musicoin the block time is 15 seconds. Let’s assume that all miners around the world are solving a big puzzle. Each lump is called a block.
A musicoin block is found every 15 seconds te an ideal world. But this is not the case, so sometimes it could be 1 2nd or even 1 minute. However, the average block time is 15 seconds.
How is this parameter being held regardless of the number of miners that connect to the network? It is overduidelijk that if there are lots of miners, they should find blocks frequently (here is an example of an empty block at UBIQ), and if there are only a few miners, the blocks will be infrequent, and the network transactions will take a very long time.
Presently, a miner or Mining Pool (many miners working together) receive 309 Musicoin coins ($13) for one solved Musicoin block.
Te the Ethereum network, Five ETH = $1,900 for one block, ter the Ethereum Classic network Five ETC = $75. Unluckily, the complexity and hashrate of thesis cryptocurrencies are higher than for Musicoin.
If the miners are to produce empty blocks and receive the money, the coin will depreciate, and with leisurely found blocks, the transactions will become stagnant, devaluing the currency once again. Right here, the difficulty starts to take place.
What is Mining Difficulty?
Simply explained, it’s just the complexity of the task that miners need to solve to create the block (the problematic chunk of the puzzle to find). This difficulty could switch. It depends on the hashrate of the network (the number of miners who mine off this coin).
If there are not many miners, difficulty falls, if there are a loterijlot of miners, the difficulty starts growing, and it becomes firmer for a particular miner to find this block.
Miners mine for coins. All of them would like to buy nice cars, good food, and fashionable clothing. That’s why it’s significant to know how much the prize is te US dollars.
If the coin price has grown on the cryptocurrency exchange, the value of the block prize increases ter US dollars.
Let’s have a look at the graph above. On the 27th of August, the price of the Musicoin coin rose. Miners that were mining coins such spil Zcash, Ethereum, Monero dreamed more profit and switched their mining equipments to Musicoin. So naturally, the Musicoin network itself reacted by enhancing its difficulty.
The difficulty is measured ter hashes (usually terahashes – TH), concerning mining, it indicates the unit of work performed. The network hashrate or nethash (number of miners) are measured by hashes vanaf 2nd (TH/s).
The network itself adjusts difficulty te such a way that the difficulty/nethash = block time (te case of Musicoin it is 15 seconds).
What Happens When Mining Difficulty Rises?
On August 27, before the price took off, the difficulty of the network wasgoed: 7.Five TH, and it’s hashrate: 500 GH/s (approximately 16000 movie cards). This price increase caused the hashrate to increase to 1.12 TH/s (1120 GH/s) (about 35000 movie cards), and the difficulty flew up to 16,728 TH.
Spil a result, the equipment’s profit, which wasgoed mining the coin BEFORE the price took off and AFTER the price took off, has not switched. The equipment began to mine fewer coins, but at a higher rate (it doesn’t matter if it is a mining equipment or an entire pool of equipments).
Many people don’t understand this critical point. Yes, you can make a duo of bucks ter thesis leaps, but it’s usually lodged te a duo of hours, and it doesn’t matter what currency you’re going to mine on the same algorithm. The prize of the miner will be the same. Of course, if you’re waiting for a currency to take off, you’d better mine it ter advance.
There is another retreat where people who closely go after the difficulty and hashrate, all networks, 24 hours a day. And when the hashrate falls, or the difficulty sags, they buy power on Nicehash which directs them to the network of the sagged coin and if the miners are brainy enough they can find a lotsbestemming of blocks.
Let’s pretend there’s only one currency – Ethereum. The hashrate of Ethereum networks are continually growing spil fresh miners are coming ter. If the Ethereum rate falls and the number of miners doesn’t switch (or even worse, increase), mining could become unprofitable.
This script will toebijten if a mining equipment gets the same profit spil it spends on electro-therapy. If that happens, the equipments will embark to turn off, and the difficulty will start to fall. Ter this case, the profit will grow again.
If that happens only the miners with cheap electro-therapy will sustain.
Wij have not yet considered the possible coming of the POS era, a hardware breakdown, a possible Ethereum ASIC (very efficient mining device) invention, etc. and of course the mining of other currencies, not just Ethereum.