So What is Hash Rate and Hash Power?
Updated: Dec 4, 2018
You’re new to the world of cryptocurrencies and are starting to piece the myriad of technical terms together so that it starts to form a picture – one that you can explain to others, even if only to impress and confirm your status as a savvy early adopter.
So you’re around friends and people are throwing terms around like hash rate but clearly without really understanding what it is. Great, this is your time to shine and confirm your position as a fintech guru, and as a hush falls over your amazed friends, you explain…
Basically, the hash rate (or hash power) is both critical and integral to the Bitcoin network, and I will explain in more detail later.
For now you need to understand why the hash rate is so important to Bitcoin mining, or any proof of work cryptocurrency.
Hash rate is at the core of all ‘proof of work’ cryptocurrency mining
The Hash Rate, (aka Hash Power) is basically the unit of measure of the amount of power being consumed by the Bitcoin network in order to be continuously functional. Expressed another way, it is the amount of hashing power that is required to ensure in order for blocks to be generated (or found) at a mean time of 10 minutes.
In the next article I will explain just what a Bitcoin hash is, but for now you just need to know that the network consumes an enormous amount of electricity (more than Cuba apparently) just to solve complex mathematical problems in order to find the blocks.
In order to mine a block, a miner needs to effectively hash the block’s header in such a way that it is less than or equal to the target.
Currently, the target is that the SHA-256 hash of a block’s header must be a 256-bit alphanumeric string, and starts with 18 zeros, and this changes along with the difficulty (adjusted every 2016 blocks).
You still following? Good.
The miners arrive at this particular hash (also known as a target) by varying a portion of the block’s headers, called a nonce. A nonce always starts with “0” and is continuously incremented in order to obtain the required hash (or target).
This really is a shoot in the dark scenario with a miniscule chance of striking the hash (target), which because it starts with a string of zeros, is a l-o-n-g shot. As such, the miner needs to keep trying and it will take many, many attempts to be successful.
Back to hash rate. That actual number of attempts made (per second) is known as the hash rate (or hash power). The process of using hashing to make these numerous attempts using hardware specifically designed for that purpose, is what we know as the process called Bitcoin mining.
Measuring the Hash Rate
At this point your friends are hugely impressed – but you’re not finished, now’s the time to completely cement your position as a potential Satoshi Nakamoto. It’s time to throw around your hash rate denomination terminology. Ready for it? Of course, you are…
As mentioned earlier, hash rate is measured in hashes per second and expressed as [h/s].
Following are the denominations:
The Bitcoin network hash rate is currently at 27,5 TH/s and the overall trend is increasing based largely on the growing number of miners joining the network.
The relationship between Hash Rate, Miner’s Reward And Difficulty
There is an interrelationship between the hash rate, miner’s reward, and difficulty level.
As the difficulty level increases increased hash rate is required to mine/find the blocks enabling the miners to earn the block reward of 12.5 BTC plus the transaction fees.
On the other hand, the ‘difficulty’ increases as a result of more miners plugging into the network, and so the hash power needs to be increased because more computational guesses need to be made (per second) to find the solution.
This balance and correlation is enforced in the Bitcoin protocol itself in order to ensure that the average block time remains at 10 minutes. Fascinating, isn’t it.
Mining Bitcoin is not for the faint hearted and is accompanied by risks. But risks aren’t necessarily negative if properly understood, quantified, and managed. Mark Zuckerberg said “the biggest risk is not taking one.”
If you are interested in mining the currency of the future then do your research, understand how mining works, and then make your decision.