Difficulty adjustment

New bitcoins come into circulation with each newly validated block. Creating valid blocks requires miners to generate a proof-of-work by spending computational power on finding this proof, as discussed earlier. On average, with the entire network of miners working to solve the next block, finding this solution takes around 10 minutes, meaning every 10 minutes or so a new block is added, and new bitcoin comes into circulation as per the aforementioned reward schedule.

You might then wonder, what happens if the network of miners grows or shrinks in total computational power, perhaps because new miners join the network, or because the hardware they use improves over time? If they can collectively make more guesses to find the proof faster, does that mean bitcoins come into circulation quicker and quicker?

Bitcoin has accounted for this. Every 2 weeks or so - or more specifically, every 2016 blocks -, the difficulty of the proof-of-work requirement is adjusted based on how quickly those 2016 blocks have been solved. Referring back to the more detailed videos on proof-of-work of the previous segment, the network essentially adjusts its requirements for how many preceding 0's the proof should have, and thus how difficult solving it is. If the network was too slow, the difficulty is reduced. If the network was too fast, the difficulty is increased.

This ensures that no matter what happens with the size of the total computing power of network (also called hashrate), new blocks and thus new bitcoin are added on average every 10 minutes. This process is called Bitcoin's difficulty adjustment, and solidifies its monetary policy together with the reward schedule, regardless of technological improvements or fluctuations in the size of the mining network.

Creator	Time	URL
3Blue1Brown	1min	Full source