Bitcoin mining difficulty has hit a record high, surpassing the 50 trillion hashes mark for the first time ever. But what is mining difficulty, and what does it mean for the industry?

Mining difficulty, which is adjusted automatically via an algorithm, is vital for maintaining the pre-programmed pace of Bitcoin supply as outlined by the anonymous Satoshi Nakamoto in the Bitcoin whitepaper. Without it, blocks would be appended to the blockchain at an ever-increasing speed as more miners join the network.

In the early days of Bitcoin, mining could be done on a personal laptop, as the difficulty was far lower due to the low number of miners. Now, however, the network is far more competitive and requires supercomputers to join the race. This has resulted in the hash rate, or the computational power of the Bitcoin network, also being at an all-time high.

The higher hash rate and mining difficulty are generally positive for the security of the Bitcoin network, as it makes it exponentially harder for a malicious actor to seize control of 51% of the network. This is known as a 51% attack, where coins could be double spent and the veracity of the blockchain would be in doubt.

But there are downsides too. Higher difficulty means less profit for miners, and more energy input is required, meaning more cost for miners. This is why miners are feeling the pinch, as the rapid decline in the Bitcoin price, down from $68,000 at the peak of the bull market in late 2021, has obviously hurt the mining industry. Not to mention rising energy costs and the Russian war have added to miners’ woes.

This is why mining stocks have massively underperformed Bitcoin over the last year, as can be seen from the Valkyrie Bitcoin Miners ETF which was launched in February 2022.

With Bitcoin mining difficulty hitting an all-time high, it looks like things won’t get any easier for miners. Ultimately, it will all come down to the Bitcoin price. If Bitcoin prices increase, miners will be able to recoup their costs and profits. However, if the price continues to decline, miners will have to look for other ways to stay competitive.