Hashrate is the computational power utilized by a blockchain network to verify a transaction and add blocks in a Proof of Work blockchain network. In simple words, the hash rate can be defined as the speed of mining, measured in units of hash/second. Crypto mining involves finding blocks through these complex computations.

Hash is a random alphanumerical code generated by various crypto algorithms with a fixed word length. The machines used for mining run millions of guesses to validate a block and add transactional data to it. Generally, miners solve ‘nonce,’ i.e., Number Only Used Once to create an entirely new hash.

Importance of Hashrate

Blockchain is spoken highly for its safety, security, and transparency. Miners are the pillars holding up the security metrics. With more and more miners trying to solve the complex computations and add blocks to the network, there is an increase in hashrate per second. This results in making the process of mining complex and curbs any malicious attempt.

Hashrate, in essence, prevents a network from being vulnerable to attacks. It is a crucial dimension of blockchain security as it also represents the amount of energy one would need to spend to gain 51% of hash power and alter past blocks. Hence, a higher hash rate is considered a good indicator as it makes it harder for someone to attack the network’s immutability. On the other hand, a lower hashrate is a sign of worry as it indicates the inverse. Several exchanges even pause trades to secure their customers in such cases.

How is hashrate measured?

Hashrate is generally measured in billions, trillion, quadrillion, and more. E.g., 1 Billion hash per second is written as 1 GH/s. Verifying transactions and adding it to the blockchain is done by mining. Miners of cryptocurrency use specialized machines to solve complex computations by performing trillions of attempts in a second. The miners are rewarded for successfully mining blocks and adding them to the network. So when more and more miners become a part of the network, the hashrate increases resulting in better network security.

What causes the hashrate to change?

Several factors can influence the Hashrate of a network. One of the significant factors is the rewards. Miners are rewarded for mining hashes and running the network. For minting new coins, the successful miners get a block reward and any fee payments spent on the transactions. Miners have a big pool of cryptocurrencies to choose from a big pool of PoW currencies. Although some networks will have a high hashrate, miners are attracted to cryptocurrencies that have the highest potential ROI.

The basic calculation that a miner does is: [Reward – Cost of Mining = Profits].

E.g., Bitcoin has a hashrate of 179 exchashes/second, but the number of participating miners is still high because of the potential rewards. Bitcoin automatically adjusts the hashrate based on the currency hashrate.

Hashrate changes with the entry or exit of a number of miners connected to the network or even block time volatility. While some algorithms like Bitcoin automatically adjust the hashrate.

What happens if the hashrate decreases?

Hashrate is a crucial measure to keep the network truly decentralized. A decrease in the hashrate of a network can be a red flag for its users. This can be understood better by assuming if there is a 51% attack, i.e., if a group or an individual attacker buys enough mining equipment to control more than 50% of a blockchain’s hashrate, controlling the majority can maliciously reverse their payments, resulting in double spend. This would disrupt the security of the blockchain. Hence, a lower hashrate indicates the network’s vulnerability and the possible risks associated with it.

What happens if the hashrate increases?

A high hashrate is a good indicator of a chain’s safety. High hashrate indicates that miners would need more computing power to verify and add a block to the network, making it safe and secure. This would make cryptocurrencies more decentralized because it will make taking over the network nearly impossible. The higher the hashrate, the more energy, and equipment one would need to attack the network. This would ultimately make it difficult and expensive for someone to attack the network.

What are the implications of hashrate?

Bitcoin was designed to be controlled, and hence it increases the mining difficulty with more and more blocks that are mined. However, rising hashrate has more implications than this. Various other blockchains similar to Bitcoin have been specifically designed to adjust the hashrate as per the movements of the market.

An increase in hashrate also indicated a massive increase in the consumption of energy. Bitcoin’s Proof of Work algorithm has been in consumption in the last year, particularly for its environmental impact. According to CCAF.io, the Bitcoin network consumes energy that makes up 0.58% of global energy consumption. And if Bitcoin were a country, it would be placed 29th in the list of highest energy-consuming countries. This has led to a massive decry towards digital currencies by several countries, and the networks are hence digressing to a renewable and sustainable mode of operation.

Conclusion

Hashrate is an important concept to follow if you are a crypto enthusiast. Every time a new block is added to the network, it reconfirms all previous transactions over and over again, making it impossible to tamper. Follow Delta to stay updated and keep a close eye on developments in the Blockchain space.

What is Hashrate?