The Difficulty Upgrade

So the latest Bitcoin Difficult increase was the biggest ever by the looks of it (A useful chart is at http://bitcoin.sipa.be/index.html) and a fair few people have noticed its impact. This has pushed the difficulty over 1 million and has almost halved the generation rate.

The reason that this happened is that the 2016 blocks were discovered faster than expected and so to maintain a steady block rate the Difficulty increased. The Faster than normal discovery of blocks has happened because of a massive Increase in processing power during that 2016 block phase. This increase was brought on most likely with the general media reporting on a large number of stories, however I have found that a large amount of articles have little to no info on the actual currency and so people read more about it... get interested... want to start mining.... Start mining and thus increase the overall processing power of the network meaning that the blocks are found faster than they should be. So the system increases the Difficulty to counteract. I'll use a nice cheery metaphor for it...

Imagine a nice day in the park,  and there's your/your kid's/your nephew's/your parent's favourite Seesaw. However its being hogged by two people. The Hash rate and the Difficulty rate. Now the Difficulty rate wants to keep the seesaw balanced however the Hash Rate just keeps getting heavier (This is where the metaphor breaks down a little, but if you want you can imagine that There's a black hole/Intense Gravitational pull then you can get round it). Now the Difficulty has to get heavier as well, thankfully it's brought along some weights, however it can only balance the seesaw every so often, meaning that the Hash rate is constantly getting higher however the difficulty can only balance this every 2016 blocks. The pattern made by the Difficulty catching up with the hash rate is clearly seen on the http://bitcoin.sipa.be/index.html page.