What is Hashrate?

Hashrate is the speed at which a computer is completing an operation in the Bitcoin code. For example, 1GH/s = One Giga Hash = A computer is capable of trying 10^9 or 1000000000 hashes per second.

When calculating the hashrate of the Bitcoin network an average of the last 10 minutes is used, since each block takes roughly 10 minutes to mine or solve.

Bitcoin mining ASIC computers today can compute trillions of hashes per second, so it’s no wonder you aren’t able to mine Bitcoin on your home computer or laptop. In general the greater your hashrate, the more Bitcoin you’ll be able to mine.

Bitcoin introduced us to blockchain technology way back in 2008. Its creator, Satoshi Nakamoto created cryptocurrencies, a new type of decentralized money, independent from any government or authority. At the same time, Bitcoin popularized the SHA-256 consensus algorithm that allowed the network to process transactions on the immutable digital ledger.

This process, commonly called bitcoin mining, is the backbone of the Bitcoin blockchain. Essentially, BTC owes its decentralized nature to mining and the participants in the mining operations of the network. While somewhat controversial due to its environmental impact, mining remains crucial in the creation of new coins, securing the network, and validating transactions.

A quintessential factor in cryptocurrency mining is the hashrate of the proof-of-work network in question. Whenever you look up Bitcoin mining on the internet, you will inevitably encounter this term. So what is hashrate and what does it represent in this context? This article will provide a thorough definition of this metric which will allow you to better grasp the concept behind crypto mining and proof of work blockchain networks as a whole.

What does hashrate mean? Hashrate Definition

Hashrate is the way to measure the computational power needed to verify transactions for creating new blocks on a PoW blockchain network. The term hashrate encompasses the collective computational power provided by miners on PoW blockchains like Bitcoin, Litecoin, and Ethereum (for the latter, this is true prior to the switch to a PoS chain).

So if you are wondering what hash rate means when you are consulting an analytics website, you should understand it as the combined power of all the miners at that moment. Depending on the network, this analytics data will be presented in various size metrics. Hashrate capacity is commonly depicted in the following units:

  • Kilohashes (kh/s) – 1000 hashes per second.
  • Megahashes (mh/s) – 1.000.000 hashes per second.
  • Gigahashes (gh/s) – 1.000.000.000 hashes per second.
  • Terahashes (th/s) – 1 trillion hashes per second.
  • Petahashes (ph/s) – 1 quadrillion hashes per second.
  • Exahashes (eh/s) – 1 quintillion hashes per second.

The term “hash” represents a string of letters and numbers that is used to encode all kinds of information. When information goes through a hashing algorithm, it comes out as a specific, unique chain of characters. In this narrative, blockchain consensus algorithms use hashes to link the blocks of transaction data between them.

Bitcoin Hashrate – How Does It Work?

On the Bitcoin network, miners use purpose-built hardware (ASICs) to solve increasingly difficult puzzles that allow them to discover the next block on the blockchain. To achieve this, miners attempt to create a hash that has a lower or equal value to the target “hash” of the new block.

More precisely, they modify a single numeric value of the hash called a nonce. The goal is to eventually come across the right hash that will allow them to discover the new block by brute-forcing the algorithm. As such, every time the nonce is modified, the miners create a new, random, hash. This requires them to process millions of hashes before stumbling upon the right solution, which equates to winning the lottery.

Once the miners have discovered the target hash, the protocol adds a new block to the end of the blockchain and confirms the transactions. However, the mining hardware that works relentlessly to achieve this requires hefty amounts of electricity. Consequently, the miner that managed to solve the puzzle receives the block reward. This includes the new Bitcoin and the fees from all the transactions embedded in the block.

You might have figured out by now that without Bitcoin miners, there would be no Bitcoin network. As such, this incentive allows miners to make a profit, cover the expenses from the electricity costs, as well as replace degrading hardware.

Why Does Bitcoin Hashrate Mining Go Up?

The hashrate of the Bitcoin network (or any other PoW blockchain, for that matter) plays a direct part in the security of the network. A higher hash rate means that more miners participate in the network, contributing to its decentralization. Moreover, as the hashing power increases, a chance of a 51% attack reduces considerably.

In a nutshell, blockchain networks require a consensus of at least 51% of the miners to validate blocks. This means that a group of hackers could theoretically invest in ASICs to achieve this threshold and allow double-spending of Bitcoins. However, as the number of miners increases, this threshold becomes unrealistically hard to reach.

With that in mind, we can deduct that profitability is one of the main incentives that allow the hashrate to increase. In addition, mainstream adoption contributes to more miners joining the network, which in turn, makes the hashrate go up.

An important feature of the Bitcoin mining algorithm is its self-adjusting difficulty. Every 2016 confirmed block (around 2 weeks time), the mining difficulty increases or decreases automatically. As more miners join the competition, they generate more hashes simultaneously, which implies that they will discover the correct hash more quickly. The protocol adjusts the difficulty by assessing the average number of blocks per hour. If miners manage to generate blocks too quickly, the difficulty increases.

Does the Hashrate Influence Bitcoin Price?

A question that pops up ever so often on social media and forums is whether the hashrate impacts Bitcoin’s price. The logical answer is that it’s the other way around. As the price of Bitcoin rises, it attracts more miners to the network that want to get a piece of the action.

Expensive mining equipment suddenly becomes much more profitable, which incentivizes more companies to venture into this niche. As a result, the hashrate increases significantly during bull runs, especially sustained ones.

However, price is not the only factor that increases hashrate. Miners are also showing resilience to declining prices, and mass adoption and geographical flexibility greatly contribute to the increase in hashrate.

For example, in 2021, China banned all miner-related activities. As the leading country for mining, this resulted in a harsh downfall of the hashrates of the most popular PoW blockchains. However, other nations like Kazakhstan and Canada picked up the slack, which resulted in the Bitcoin hashrate reaching a new all-time in March 2022.

How Can You Calculate Bitcoin’s Hashrate?

Calculating the exact network hashrate for any cryptocurrency can be quite challenging. Miners mainly communicate with the network through mining pools, which makes this task even more tricky. Moreover, the exact hashrate depends on various factors such as the number of blocks mined in 24 hours, expected blocks, and work provided. For the sake of clarity, the formula looks like this:

Hashrate = ((blocks24 hours/blocksexpected)*work)/600

However, this method can provide some uneven results even if applied correctly. To consult the current hashrate of Bitcoin, we advise you to visit websites that provide this information, such as blockchain.com.

Difference Between Ethereum and Bitcoin Hashrate

We should note that hashrate is not exclusive to Bitcoin. Other PoW networks have their separate algorithms, with the most common example being Ethereum. The Ethereum network currently uses the ethash algorithm which is specifically designed to be ASIC-resistant. Hence, Ethereum miners use GPU-based mining hardware, which is more accessible to the mainstream consumer.

Finally, the Ethereum vs Bitcoin hashrate has a big difference in sheer power. While Bitcoin’s hash power is measured in exahashes, Ethereum only recently surpassed 1 petahash. Nonetheless, this statistic will be invalidated as soon as Ethereum fully migrates to a more energy-efficient proof of stake consensus algorithm in 2022.

Wrap-up

Hashrate is an ever-important metric for every PoW blockchain. It allows miners to calculate their profitability and shows the strength of the network itself. Increasing hashrates mean more miners and better security. Which in turn, allows us to believe that blockchains are headed towards increased adoption.