Difficulty

We know that cryptocurrencies are put into circulation through a process called mining and in order to be mined, miners (a powerful computer) must solve a complex mathematical problem. Miners with a higher hash rate (processing power) will have a higher probability of success and hence get the reward.

However, what does the difficulty of this process tell us about the value of the coin?

A high cryptocurrency difficulty means it takes additional computing power to verify transactions entered on a blockchain, meaning that supply is harder to come by, thus supporting prices. On the other hand, low difficulty mining means the supply is easy to come by thus providing pressure on prices.

However, as networks move away from the Proof of Work process, mining (and hence difficulty) won’t matter anymore. Take Ethereum for example, what started as PoW is now about to change to Proof of Stake - reducing the environmental impact posed by the electricity-heavy PoW mining process.