I think I understand the technical aspect of this, but can someone explain the benefits, if any? Is this just better for big, powerful mining rigs?
It introduces the potential for rarity (diminishing supply) thus a potential for appreciation. Unlike fiat currencies, bitcoin are more like gold. 
Topic: Is there a benefit to turning up difficulty? (Read 602 times)
Difficulty is adjusted so that blocks are minted as approximately the same rate as before - even when many, many more people join the network and the total Gh/s keeps rising.
Basically
Basically
Thanks BurtW for clearing up all of my confused thoughts on this one 
When most people think hear the word "Inflation" they think about the prices of things going up, which is actually the symptom and not the cause.
The strict definition of inflation is the increase/expansion of the money supply.
When the amount of money in circulation increases, it's TRUE value (it's purchasing power) goes down and it takes more of this weaker currency to buy things, which is why it looks like prices are going up. Inflation is kryptonite for currencies and the use of it must be balanced with the actual demand for that currency or else everyone loses. By making the network difficulty something that changes with demand Mr. Nakamoto has shown his understanding of inflation and how it can hurt us. The changing difficulty rate is one of the many things that protect Bitcoin users.
The strict definition of inflation is the increase/expansion of the money supply.
When the amount of money in circulation increases, it's TRUE value (it's purchasing power) goes down and it takes more of this weaker currency to buy things, which is why it looks like prices are going up. Inflation is kryptonite for currencies and the use of it must be balanced with the actual demand for that currency or else everyone loses. By making the network difficulty something that changes with demand Mr. Nakamoto has shown his understanding of inflation and how it can hurt us. The changing difficulty rate is one of the many things that protect Bitcoin users.
To clear/clean up a few things:
G/H hashes/sec". The "pie" is about 25 BTC every 10 minutes. Your "slice of the pie" is determined by your percentage of the hash rate relative to the hash rate of the entire network. If you are mining at 2 GH/sec and the network is 80,000 GH/sec on average over time you will make 25 * 2 / 80,000 = 0.000625 BTC every 10 minutes or about 0.09 BTC every 24 hours. That is about $11 per day at the current exchange rate.
Basically it keeps the people with a lot of G/H from hoarding all the coins. That is a very simple way of putting it but that's essetially it.
Not even close. The difficulty affects all miners. Not just the "people with a lot of Higher difficulty network hash rate means it is harder for someone to perform a 51% attack. The simple answer to your question is higher network hash rate difficulty = more network security.
The higher difficulty is a side effect of the higher network hash rate.if im mining in a pool that lets me pick a different difficultly to mine that should i do it or no?
That is a completely different issue. That has to do with setting up the connection between yourself and the mining pool - not the network difficulty. I would assume that if you are using a GPU to mine the default difficulty setting is probably OK. But this is a question you need to ask the pool operator - check out the pool operator's FAQ section.
if im mining in a pool that lets me pick a different difficultly to mine that should i do it or no?
I think I understand the technical aspect of this, but can someone explain the benefits, if any?
Higher difficulty means it is harder for someone to perform a 51% attack. The simple answer to your question is higher difficulty = more network security.
Satoshi built this into the system to account for advances in technology. No matter what crazy innovations come out in the future, having a difficulty factor will ensure the steady, controlled growth of BTC.
The difficulty is adjusted in order to make the entire Bitcoin network produce one solved block about every ten minutes. If the network is solving blocks too fast the difficulty is raised. If the network is solving blocks too slowly then the difficulty is lowered.
Make sense now?
So as more and more miners come on board and as the ASIC machines start hashing the combined hashing power of all the miners will cause blocks to be produced too quickly so the difficulty will go up to compensate for the increased hashing power which will bring the rate of block production back down to where it is suposed to be.
The "benefit" of the difficulty adjustment is that the network produces blocks at a more or less constant rate (one block every ten minutes).
You can see all kinds of cool charts showing the network hash rate and the difficulty level over time here:
http://bitcoin.sipa.be/
Maybe by looking at these charts you can understand how it works.
Let me know if you have any more questions.
Make sense now?
So as more and more miners come on board and as the ASIC machines start hashing the combined hashing power of all the miners will cause blocks to be produced too quickly so the difficulty will go up to compensate for the increased hashing power which will bring the rate of block production back down to where it is suposed to be.
The "benefit" of the difficulty adjustment is that the network produces blocks at a more or less constant rate (one block every ten minutes).
You can see all kinds of cool charts showing the network hash rate and the difficulty level over time here:
http://bitcoin.sipa.be/
Maybe by looking at these charts you can understand how it works.
Let me know if you have any more questions.
Basically it keeps the people with a lot of G/H from hoarding all the coins. That is a very simple way of putting it but that's essetially it.
I think I understand the technical aspect of this, but can someone explain the benefits, if any? Is this just better for big, powerful mining rigs?
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