Algorithms Another concept that has been introduced with the advent of bitcoin and altcoins is difficulty in retargeting algorithms.
In bitcoin, a difficulty target is calculated simply by the following equation; however other coins have either developed their algorithms or implemented modified versions of the bitcoin difficulty algorithm: T = Time previous * time actual / 2016 * 10 min The idea behind difficulty regulation in bitcoin is that a generation of 2016 blocks should take roughly around two weeks (inter-block time should be around 10 minutes).
A Complete Guide to Understanding This Blockchain Concept
If it takes longer than two weeks to mine 2016 blocks, then the difficulty is decreased, and if it takes less than two weeks to mine 2016 blocks, then the difficulty is increased.
When ASICs were introduced due to a high block generation rate, the difficulty increased exponentially, and that is one drawback of PoW algorithms that are not ASIC resistant.
This also poses another problem; if a new coin starts now with the same PoW based on SHA-256 as bitcoin uses, then it would be easy for a malicious user to just simply use an ASIC miner and control the entire network.
This attack would be more practical if there is less interest in the new altcoin and someone decides to take over the network by consuming adequately high computing resources.
This may not be a possible attack if other miners with similar computing power also join the altcoin network because then miners will be competing with each other.
Also, multipools pose a more significant threat where a group of miners can automatically switch to the currency that is becoming profitable.
Why This Matters for Blockchain Technology
This phenomenon is known as pool hopping and can adversely affect a blockchain, and consequently the growth of the altcoin.
Pool hopping impacts the network adversely because pool hoppers join the network only when the difficulty is low and they can gain quick rewards; the moment difficulty goes up (or is readjusted) they hop off and then come back again when the difficulty is adjusted back.
For example, if a multipool consumes its resources in quickly mining a new coin, the difficulty will increase very quickly; when the multipool leaves the currency network; it becomes almost unusable because of the fact that now the difficulty has increased to such a level that it is no longer profitable for solo miners and can no longer be maintained.
The only fix for this problem is to initiate a hard fork which is usually undesirable for the community.
Key Points to Remember
- Difficulty adjustment and retargeting algorithms Another concept that has been introduced with the advent of bitcoin and altcoins is difficulty in retargeting algorithms.
- If it takes longer than two weeks to mine 2016 blocks, then the difficulty is decreased, and if it takes less than two weeks to mine 2016 blocks, then the difficulty is increased.
- When ASICs were introduced due to a high block generation rate, the difficulty increased exponentially, and that is one drawback of PoW algorithms that are not ASIC resistant.
- This also poses another problem; if a new coin starts now with the same PoW based on SHA-256 as bitcoin uses, then it would be easy for a malicious user to just simply use an ASIC miner and control the entire network.
Going Deeper: Advanced Concepts
There are a few algorithms that have come into existence to address this issue and are discussed later .
All these algorithms are based on the idea of readjusting various parameters in response to hash rate changes; these parameters include the number of previous blocks, the difficulty of previous blocks, the ratio of adjustment, and the number by which the difficulty can be readjusted back or up.
In , be introduced to the few difficulty algorithms being used in and proposed for various altcoins.
Conclusion
Difficulty adjustment and retargeting represents one of the many innovative layers that make blockchain technology so powerful and transformative. As distributed systems continue to evolve, a solid understanding of these core concepts becomes increasingly valuable — not just for developers, but for anyone building, investing in, or working alongside blockchain-powered systems.
Whether you are just starting your blockchain journey or deepening existing expertise, mastering these fundamentals gives you the tools to think clearly about decentralized systems and make smarter decisions in this rapidly evolving space.