What Is Hash Rate and Why Is It Important for Bitcoin?

With Bitcoin becoming increasingly popular and appearing in the news more and more frequently, you have likely heard the term hashrate. But what is a hashrate? And why is Bitcoin’s hashrate so important?

Basically, a hashrate indicates the computing power being used by a network, and it is important to use it to gauge the viability and future of a blockchain. Read on to learn the specifics about hashrates, as well as learn why you should care.

What is a Hashrate?

To understand hashrate, you must first understand the hashing process. In short, the hashing process is the process a blockchain carries out to produce a single hash—a randomly generated 64-digit number that must be solved using a mathematical equation. Miners then submit their guesses or hash, and the first one to guess correctly wins that hash (and the mining reward), then that block is added to the blockchain.

Blocks of Bitcoin transactions cannot be added to the blockchain without this hash, which is why it is important that there are enough Bitcoin miners (and a high enough hash rate) that the blockchain is usable. If the hashrate suddenly dropped to 0 (which it won’t) this would indicate that no one was mining Bitcoin and that transactions could not be processed until a miner began hashing again.

The hashrate is the number of guesses submitted per second for a particular hash. A higher hashrate means there is more computing power, and more individuals involved in mining Bitcoin. Unfortunately, this also means that the cost and use of energy is increasing, and that mining difficulty increases.

Regardless, we don’t want you to assume that a high hashrate is bad—because it’s not. But it isn’t necessarily a good thing either. It is a debate that arises frequently among Bitcoin investors and miners.

Why Does Hashrate Matter?

Even though a high hashrate is both good and bad, it’s important to know that hashrate does matter. Below are only some of the things a hashrate can reveal about a blockchain.

1. Security

One of the best benefits of a high hashrate is that it increases the security of the blockchain. With a high hashrate, it is more difficult for rogue miners, or a small group of miners, to control the future of the blockchain. This makes it more secure for everyone. In fact, a high hashrate decreases the likelihood that a blockchain flaw, known as the 51% attack, can be exploited by malicious actors.

2. Network Health

A high hashrate, because it increases security, is also a sign of blockchain health. Not only is it an indicator that there is more participants and that transactions are being approved in a timely manner, but it also means the risk of market manipulation is low.

3. Mining Difficulty

As we mentioned above, one of the downsides of a high hashrate is that it increases the difficulty of mining. While difficult mining does increase electricity consumption, it also means that block rate tends to be steady, even if miners go online and offline with some frequency. This makes it a better experience for everyone, even if the miners receive fewer mining rewards than they did before.

It is also important to note that when mining difficulty increases, there is more competition among miners. This can lead to increases/innovations in mining technology and can fuel companies to lean toward different mining setups.

How is Hashrate Measured?

Hashrate is measured in the terms of hashrate per second or h/s. The top number is always a whole number (you can’t have a partial hash) and can extend into the sextillions. Recently, Bitcoin passed into zetahash territory, which means at one point, there were more than 1 sextillion hashes occurring in a single second.

Remember, the hashrate of any blockchain is fluid, and it can lower and rise numerous times during a single 24-hour period.

Do All Blockchains Have a Hashrate?

No, the term hashrate is specific to proof-of-work blockchains. Why? Well, the explanation is in the name of the consensus mechanism—remember, hashrate is the attempt of multiple computers to solve a single hash in race conditions. When they do solve it, they must show their work in order to win the block reward. As such, you can imagine that on any blockchain, you aren’t required to show work; hashrate isn’t a thing.

This means that proof-of-stake, proof-of-history, and pretty much any other consensus mechanism you can think of don’t rely on hashrate.

What Blockchains Have a Hashrate?

Any blockchain that is based on proof-of-work will have a hashrate. While new blockchains are being created every day, below are the current major proof-of-work blockchains that rely on hashrate.

·      Bitcoin

·      Dogecoin

·      Bitcoin Cash

·      Litecoin

·      Monero

·      Zcash

·      Ethereum Classic

·      Kaspa

·      Dash

·      Siacoin

As we mentioned above, there are many blockchains that aren’t on this list. These are just the top proof-of-work blockchains.

Should You Only Buy Tokens From High-Hashrate Blockchains?

What cryptocurrencies you decide to invest your money in is up to you; however, as we mentioned in this article, high hashrate is directly tied to popularity and security—two things which you should be looking for when investing.

Remember, though, that hashrates are only for proof-of-work blockchains, and if you are considering an investment in Ethereum, you won’t find a hashrate. This doesn’t mean Ethereum isn’t a good investment—it just can’t be considered in terms of hashrate.

But yes, if you are looking for a proof-of-work blockchain investment, then you should absolutely look at the hashrate. This can let you know how many people are mining the token, and help you estimate its future success. Also, remember that higher hashrate equals more security, which is always a good thing in crypto.

Overall, hashrate is only one small aspect of the blockchain realm, and while it can help drive your investment decisions, it shouldn’t be the only thing you look at. Remember, all investments carry risk, even those in fiat and those in blockchain with a high hashrate.