“Hashrate” refers to all of the combined computing power used to mine and process transactions on a proof-of-work blockchain such as Bitcoin and Ethereum (prior to the 2.0 upgrade). A “hash” is a fixed length alphanumeric code used to represent words, messages and data of any length. Crypto projects use a variety of different hashing algorithms to create different types of hash code. Think of these as random word generators, where each algorithm is a different system for generating random words. For example the hash for “coindesk” using the hashing algorithm used by Bitcoin, SHA256, = f2429204b339475a3d94dd5450f5ebb3c80130a85fbb91d62768741a3b34a6b6
Before new transaction data can be added to the next block in the chain, miners must compete with their machines to solve a difficult math problem. In particular, miners try to create a hash that is less than or equal to the numerical value of the ‘target’ hash by changing a single value called a ‘nonce’. Every time the nonce is changed, a completely new hash is created. This is practically like a lottery ticket system where each new hash is a unique ticket with its own numbers. For example, if we take “coindesk” and change the first letter to “foindesk” we get this hash = 5a12a9af1b5794bf6855c15944339d41ff713665e415b5434b8c9f081c61b66a A miner gets the right to fill the next block. Every time this happens, the successful miner will receive a block reward of re-minted coins as well as any fee payments associated with the transactions they are storing in the new block.
The block reward, which is a predetermined amount of free coins given to a miner each time a new block is mined, is programmed to be halved in order to gradually reduce the total supply over the life of a coin. With Bitcoin, block rewards are halved every 210,000 blocks, or approximately 4 years. Starting in 2021, miners will receive 6.25 bitcoins every time they mine a new block. The next halving is expected to happen in 2024 and the rewards for Bitcoin blocks will drop to 3.125 Bitcoins per block. Dash is another minable cryptocurrency that reduces its block rewards by 7.14% every 210,240 blocks, while Litecoin cuts its rewards in half every 840,000 blocks.
Application-specific ASIC mining hardware (Integrated Circuit) now dominates the crypto mining area and is designed exclusively for the execution of hashing functions. Some modern ASIC rigs are capable of 110 tera hashes per second (TH / S), which equates to 110 trillion attempts to solve the hashing problem per second.
Miners are motivated to do all of these in search of financial rewards. However, they play a key role in securing cryptocurrencies, especially Bitcoin, by making it difficult (namely very expensive) for attackers to gain 51% majority control over the blockchain network.
Hashrate FAQs
What is the current hash rate of Bitcoin?
At the time of this writing, it was 171 million EH / s, which stands for exa hashes per second. 1 exa hash = 1 trillion hashes.
That means miners are calculating 171 trillion hashes per second. You can find the most current estimate on Blockchain.com.
Why is hashrate important?
Higher hashrate means that more resources are devoted to processing transactions on the blockchain. This makes a network more resilient to attack as a malicious agent would have to spend huge sums of money to outperform other mining facilities, gain 51% majority control and stop other people’s transactions or double-spend their own coins.
It follows that the higher the hashrate, the more difficult it is for a bad actor to obtain the required hashing power and the more difficult it is to attack the network.
What is Mining Difficulty?
The “difficulty” of mining is how difficult it is for miners to produce a hash that is below the target hash.
In Bitcoin, the level of difficulty is automatically adjusted every 2,016 blocks. Blocks are supposed to be found by miners every 10 minutes. If, on average, miners find bitcoins more than every 10 minutes, the difficulty increases. When miners find bitcoins less than every 10 minutes on average, the difficulty goes down. At Ethereum, the complexity of mining uses a system similar to Bitcoin, and it has added a “difficulty bomb” that was launched back in 2015 and went live during the Homestead update in early 2016. This increases the time it takes to mine each new block, with the goal of phasing out ether degradation to make way for the new proof-of-stake (POS) mechanism in the 2.0 upgrade.
Difficulty is a key element in calculating a hashrate. The harder it is to mine, the more hashes must be generated to find the block rewards, increasing the overall hash rate.
How is the hashrate calculated?
There is no way to know for sure the exact hashrate of a minable cryptocurrency, although it can be estimated. Hashrate is traditionally estimated based on public data about the underlying cryptocurrency, including the difficulty metric described above.
While this traditional estimation method is in the right context, it has long been criticized as not being accurate. The Kraken crypto exchange proposed another method of estimating hash rate, using statistics to show with 95% confidence that the hash rate was in a certain range.
Why has Bitcoin’s hashrate increased?
Graph of the total hash rate of Bitcoin
Source: blockchain.com
More and more miners have stepped into Bitcoin’s brief history and propelled the hash rat to the top.
The most likely reason for new miners joining the highly competitive environment is Bitcoin’s high price potential. An increase in demand for Bitcoin (which is a scarce commodity) recently pushed the price above $ 40,000 per coin (it’s now lower at press time), which in turn has attracted more operators looking to generate those significant returns .
Every increase in miners increases the difficulty of Bitcoin, which then increases the hashrate.
