Blockchain Mining Hash Power: How Cryptocurrency Hash Rate Works?
If you are just getting started learning about cryptocurrencies, then it’s possible that you’ve heard about Bitcoin’s hash rate, which is also referred to as hash power. In recent times, the hash rate of Bitcoin has decreased. Does this make you wonder what hash rate means?
Hash rate or hash power is something integral to the Bitcoin network for numerous reasons, and is something that we will go into detail about later.
But before that, it’s crucial that you understand what hash rate and nodes are, as this will let you understand why it matters so much.
What Are Nodes?
Before we talk about hash rate, let’s discuss nodes. A node is a powerful computer that helps to run the Bitcoin network. Nodes work by relaying the information sent and received. Anyone can run a node, you just need to download the free n and leave a specific port on your computer open.
The downside of running a node is that it consumes both energy and storage space, which is around 145GB. Nodes help to spread bitcoin transactions throughout the network. One node will send information to a few that it knows, who will then relay information to it knows they know etc. This helps the network operate quickly.
Some nodes are named mining nodes, and are usually referred to as miners. These group outstanding transactions into one place (blocks) and then add them to blockchain. This is accomplished by solving a complex puzzle, as we discussed (finding the hash).
What is A Hash Rate?
Hash Rate or Hash Power is the measurement of how much power the Bitcoin network consumes to be continually operational.
In order to find the Bitcoin hash, the Bitcoin network goes through a lot of energy as it needs to solve intense computations to find the blocks.
These computations for finding the blocks are essentially math puzzles that miners need to solve in order to be rewarded with cryptocurrencies.
These computations for finding the blocks are basically mathematical puzzles that a miner cannot just guess without a lot of computation.
To mine a block, a miner needs to hash what’s called the block’s header in a way that is less or equal to the target.
In this case, the target is a SHA-256 hash of the block’s header and must be a 256-bit number string and start with 18 zeros. The target shifts as the difficulty evolves every 2016 blocks.
Miners find this hash or target by varying a small amount of the block’s headers, which is also called a nonce. A nonce starts with a 0 and gets bigger every time once a hash is obtained.
Since finding the nonce is a guessing game, the chance of finding the right hash is very unlikely. This means that numerous attempts must be made by the miner through varying the nonce.
This number of attempts each second is called the hash rate or hash power. And this hash or number of guessing attempts by the miners who mine Bitcoin blocks is named Bitcoin mining.
Economics Of Has Power
Right now, the reward for mining a Bitcoin block is 12.5 Bitcoins, which is around $200,000.
However, this deal is not nearly as great as it sounds. There are a lot of nodes out there competing for that reward, and it’s also a matter of luck and computing power (the more powerful your computer is, the luckier you’ll be).
Additionally, the added costs of a mining node are impressive, not just because of the powerful hardware that it needs, but also due to the large amounts of electricity that mining naturally consumes. In fact, it’s estimated that the bitcoin mining power consumes more energy than the entire country of Ireland.
Also, the number of Bitcoins that will be rewarded for solving the puzzle will decrease over time. Right now it’s 12.5, but this number will halve every 4 years. The next halving will occur around 2020. Although the value of Bitcoin could go up relative to the cost of electricity and hardware over the next few years, this is not guaranteed.
How Is The Hash Rate Measured?
Hash rate is measured in hashes per second (h/s) and there are some standardized ways to refer to it.
- 1 kH/s is 1,000 (one thousand)
- 1 MH/s is 1,000,000 (one million)
- 1 GH/s is 1,000,000,000 (one billion)
- 1 TH/s is 1,000,000,000,000 (one trillion)
- 1 PH/s is 1,000,000,000,000,000 (one quadrillion)
- 1 EH/s is 1,000,000,000,000,000,000 (one quintillion)
Comman Hash rate Conversions
- 1 MH/s = 1,000 kH/s
- 1 GH/s = 1,000 MH/s = 1,000,000 kH/s
- 1 TH/s = 1,000 GH/s = 1,000,000 MH/s = 1,000,000,000 kH/s
Hash Rate and Miner’s Reward Difficulty
The hash rate and miners reward are all interlinked to each other in a number of ways. For example, when the Bitcoin network difficulty increases, more hash rate is needed to mine and find blocks and as a result, miners can earn the block reward plus the transaction fees. Also, the difficulty of the Bitcoin network increases due to more miners joining the network, which further increases the hash power that is required.
This correlation is forced by the Bitcoin network itself so that the average block time remains at 10 minutes in length.
After going through this guide, some of you may want to mine Bitcoins through providing hash power to the network – but this is very expensive and energy-intensive that is not suitable for everyone. This requires you to purchase expensive hardware and pay for large power bills, and demands a great deal of expertise.
Until you are ready to mine Bitcoins, keep working hard at your job and HODL the Bitcoins that you have now.