Trading Crypto Guide ™

What Is Retargeting?

A retargeting algorithm, also referred to as a difficulty adjustment algorithm, is used on proof-of-work blockchains, such as Bitcoin.
Each block on PoW blockchains is created by a miner solving a complex set of equations or puzzles, however, the puzzles get harder and harder to solve after each block. The puzzle is solved by miners varying a nonce (number only used once) that produces a hash value that is lower than the hash target, which is a predefined condition of each block.

Each miner competes with the others to be the first one to solve the puzzle. The first one to solve it will receive a reward of Bitcoin and after the majority of miners reach a consensus, the block will be validated and added to the blockchain.

In order to define the block’s hash value and validate the transaction, miners must use the SHA-256 hashing function until the value is less than the target. If not, they need to keep modifying the nonce and repeat the SHA-256 hashing function until it is.
However, this predefined target is adjusted every 2016 blocks, approximately every 14 days, and is called “retargeting.” Retargeting ensures that the average time it takes to generate a block, 10 minutes, is maintained by increasing the difficulty of the puzzle.

Retargeting is generated by dividing the hash target of the first block by the hash target of the current block. This constant retargeting on PoW blockchains means that more computing power is required by miners today than when Bitcoin was created in 2009.

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What Is a Minnow?

In the English language, “minnow” can refer to a small fish — and a person or organization who is regarded as small or insignificant.

The same concepts apply in the world of cryptocurrencies. A minnow refers to someone who owns a relatively small amount of digital assets. This means that, when they buy or sell their crypto, it’s unlikely to have a substantial impact on the rest of the market.

This is at odds with whales — the term that refers to the very small number of individuals and institutions who hold substantial sums of cryptocurrencies such as Bitcoin. If they decide to sell their holdings, there’s a very real risk that they could affect the spot prices that are seen on exchanges.

In rare cases, even a minnow can have a big impact. Some altcoins have incredibly low trading levels and a dire lack of liquidity, meaning that prices can shift dramatically even after a modest sale.

There’s no exact definition for how much of a crypto investment someone needs to hold in order to count as a minnow. However, research suggests that the vast amount of investors do fall into this category.

Even though the vast majority of addresses on the Bitcoin blockchain hold less than 0.1 BTC, they collectively own just 1% of the BTC that’s currently in circulation.