What is the Ethereum Difficulty Bomb: Important Things You Should Know

Ethereum Difficulty Bomb

Ethereum Difficulty Bomb — The main advantage of cryptocurrency platforms over fiat currency it is its decentralization. Ethereum digital currency is used not only to make payments, but also to complete transactions based on the smart contacts principle, so its demand has grown dramatically lately. This situation affects the difficulty of Ethereum and the profitability level of your mining.

Why Does Coin Mining Difficulty Change?

Ethereum miners find that their earnings are dwindling and it takes longer and longer to extract each block.

To maintain the same level, it is necessary to invest a lot of money in new equipment with better performance. Let's find out what the difficulty of mining ETH depends on.

The difficulty of Ethereum mining as well as the level of earnings depend on several factors:

  • The number of miners connected to the platform, which affects the network hashrate;
  • The time during which a cryptographic puzzle is solved, that is, a block is mined;
  • Change of applied mining algorithm;
  • Cryptocurrency rate, determined by current exchange rates;
  • The cost of electricity;
  • The computing power of equipment used for mining.

Why is ETH's Mining Difficulty Growing?

Now let's answer why the difficulty of Ethereum mining is growing? The platform's developers created an algorithm that regulates the default commit time for a block.

If the number of miners increases, the block is mined very quickly. This problem is solved by increasing the complexity of a cryptographic puzzle, taking time for a certain pattern.

In the opposite situation, when the hashrate is insufficient, block confirmation takes longer. In this case, the ETH mining difficulty decreases.

These changes in Ethereum mining difficulty negatively affect users who have purchased high-end hardware (ASIC systems, modern graphics cards).

Increasing difficulty decreases reward, so payback period increases significantly. The level of difficulty is changed every thousand blocks based on the analysis of network operation.

Sometimes, miners end up earning next to nothing, as their profit is totally consumed by paying electricity bills.

In such situations, the strongest survive, who can wait for the moment when the weakest miners go to other networks, and the difficulty of mining Ethereum will decrease.

Ethereum Difficulty Prediction 2021

The entire history of this indicator's fluctuations is available on the Internet, just analyze the online mining difficulty chart below.

ETH Difficulty History Graph of All Time

ETH Difficulty History Graph of All Time

In 2021, the difficulty of mining Ethereum reached new heights, updating its historical maximum.

This is mainly due to the increase in the value of ETH, which hit $2.000 in February 2021. Therefore, we can expect that the second largest cryptocurrency mining difficulty will set new all-time highs.

Therefore, it makes sense to mine ETH until the exponential growth of difficulty begins if the hardware still allows it. It is definitely inappropriate to buy expensive devices specifically for Ethereum mining at the moment.

Probably in the near future, developers will finally move to full Ethereum 2.0, which will work on the PoS consensus algorithm.

However, there are also opinions that it will be possible to extract Ethereum on video cards for at least several years more because developers are constantly delaying the release of Ethereum 2.0.

But here not everything is so simple, as this niche is occupied by big players, especially after the price of ETH rose to $2.000.

What is Ethereum Difficulty Bomb?

When creating the Ethereum network, his team developed a mechanism to complicate coin mining, called the difficulty bomb. So what is the difficulty bomb Ethereum? Ethereum protocol developers coordinator Tim Beiko said:

It's a mechanism in Ethereum that makes it exponentially harder to mine. It is as if we are artificially adding miners to the network, which increases the difficulty, making it difficult for all other miners that are in the network to mine a block.

Thus, the Ethereum difficulty bomb is needed to make it less profitable for miners to mine blocks using Proof of Work, and they tend to switch to Proof of Stake.

In other words, Ethereum's difficulty bomb is a deterrent for miners who want to keep working with the PoW chain even after the blockchain changes to PoS.

If all miners don't switch to the Proof of Stake, there is a risk that the Ethereum blockchain could split.

A similar situation occurred in 2017, when Bitcoin miners split their blockchain, resulting in Bitcoin Cash.

However, the founders of Ethereum foresaw this possibility and programmed the blockchain to increase the difficulty levels of Ethash's mining algorithm.

Summarizing About Ethereum Difficulty Bomb

The objective of the Ethereum difficulty bomb was to encourage the miners to switch to PoS. The ETH difficulty bomb is still needed to maintain balance in the network and project viability.

Still, another question often arises — how long will developers delay the transition to PoS? If the developers were serious about implementing the project's roadmap, the need for constant transfers to activate the difficulty bomb from mining Ethereum would disappear by itself.

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