Hash rate is a fundamental concept in understanding how Bitcoin works and the role proof-of-work plays in its security.
The hash rate or hash rate is the unit of measurement of all the computing power of the Bitcoin network. Its numerical value is used to express the number of mathematical operations performed between all Bitcoin miners competing against each other for the reward. In this way, the hash rate is involved in several functions: verification of transactions, allocation of rewards and network security.
- The hash rate is a measure that is used to know the level of security of Bitcoin.
- Not all networks that use proof of work have the same computing power.
- The value of a cryptocurrency affects the growth of its hash rate.
- Specialized equipment with a high hash rate is required to mine Bitcoin.
- There are different units to measure hash rate.
Hahrate can also be understood as an individual miner’s ability to perform mathematical calculations. So with this value we can calculate the efficiency of a bitcoin mining operation. In addition, the electricity consumption and the number of calculations that one or more special equipment can perform per second are estimated.
The Block Reward is the primary incentive for individuals and companies engaged in Bitcoin mining. Therefore, the value of this reward affects the hash rate. More people and businesses join if the network they participate in is valuable.
Hash rate is an indicator of the degree of participation in a network that uses proof of work or PoW as a consensus mechanism. Another way to put it: hashrate is to Bitcoin mining what votes are to an electoral system.
Why is hash rate important for Bitcoin security?
The hashrate has a direct relationship with the security of the Bitcoin network. Since all participants keep copies of all transaction records, it is very difficult to coerce or deceive a community with hundreds of thousands of participants spread across the globe.
This means that the higher the participation of Bitcoin miners, the more difficult it is to carry out an attack against the transaction history (or blockchain, as it is popularly called). In fact, it is not only more difficult, but also more expensive, since the network in question is larger. Bitcoin, for example, consists of a network of millions of mining equipment.
To get an idea of the size of this number, let’s imagine that the network consists only of Antminer S19 Pro equipment, which has a computing capacity of 110 TH/s. If the Bitcoin hash rate is 250 PE/s at any given time, that would indicate that 2.27 million of those computers are online. Of course, there are many models that have less capacity and others with more power. Either way, the amount of equipment used to mine Bitcoin today is exorbitant.
Various types of attacks can be performed on computer networks, but only a 51% attack (or team attack) poses a threat to a network like Bitcoin. Or so they say, because it seems virtually impossible given that it takes a lot of electricity and mining to do it. Using the hypothetical figure above, it would take 1.2 million of these devices and the cost of electricity to operate indefinitely (an hour, a day?).
A 51% attack would require the attacker to have a capacity of at least 51% of Bitcoin’s total computing power. With this hashrate, you can avoid transaction confirmation. He can also secretly create a transaction history containing some transactions he made himself and not others (except for the mining reward). He would then try to quickly release his version of the transaction history. The longest blockchain (by the attacker, if successful) would replace a shorter one, and the rest of the participants would recognize it as true, since it is precisely the one with the highest number of valid transactions.
A 51% attack on a small network in 2018, Verge, Monacoin and Electroneum were hit for 51% attacks. In 2020, Ethereum Classic also suffered two 51% attacks. In the same year, Bitcoin Gold also suffered two such attacks. Because these were small networks, the attackers didn’t need a lot of computing or power resources.
The reason is that in Bitcoin everyone is in competition and whoever manages to add a new block of transactions must transfer it to the rest before another competitor. When a miner, via his node or his computer, receives the information with all the new transactions, he checks that it is consistent with his history and that there are no “information gaps” (or that it was not left behind in recognizing the sequence of transactions). block, for example due to disconnection).
The system is made to accept the blockchain that shows the most recent information as true, which is usually the one with the highest number of valid blocks. If someone wanted to do this attack on Bitcoin today, they would need a lot of equipment that is not on the market.
Why is the hash rate increasing and affecting Bitcoin mining difficulty?
There is a simple explanation for understanding the constant growth of the Bitcoin hash rate and its importance: the appreciation of the currency given as a reward. The main incentive for a cryptocurrency mining network is financial.
The main consequence of the growth of the hashrate is the increase in the difficulty of mining. Bitcoin Code automatically adjusts every 2,016 blocks (about two weeks) a setting called difficulty level adjustment.
If more miners join the network, the difficulty level is increased, preventing miners from getting more coins over a period of time. If miners go offline instead and the hashrate goes down, the adjustment results in getting as many coins as the available computing power allows. In other words, Bitcoin is programmed so that the release of BTC through mining is constant. Approximately every ten minutes, new Bitcoin coins are generated.
Not all networks have an increasing hashrate. However, cryptocurrency miners often seek profitability in networks whose currencies are rising in value. No network has grown as much as Bitcoin over time.
What is a hash function and how does cryptography work?
To fully understand what the Bitcoin hash rate is, it is necessary to briefly define what a hash function is. Basically, it is a function used in cryptography to convert one item to another, in terms of information. The result of this conversion is expressed in alphanumeric terms.
If this seems complicated to you, imagine that this “hash function” is a box capable of converting the word CriptoNoticias into a sequence of numbers and letters like this: b4cc8e3e952fe56998fbb492ae63f11fb6766d3af91517126c418a2
A single change to the initial word would produce a completely different sequence. For example, if we enter the word KriptoNoticias in the box, the result will be different. This makes the result a unique piece of data and is crucial for cryptography.
It is the hash function or mathematical procedure used by Bitcoin (and other cryptocurrencies). The same function is used at different stages and levels of the system. For example, to create private keys and confirm transactions. Sha-256 is very safe, it is used by military intelligence all over the world.
This procedure also prevents the detection of the initial data of a sequence. For example, to create public addresses (equivalent to an account number where BTC payments can be received), the private key and cryptography are used. No one can know what is someone’s private key or cryptographic key with the information provided by the public address.
How does Bitcoin hashrate work?
The Bitcoin hashrate is the sum of millions of mathematical operations involving cryptographic processes every second. Responsible for carrying out all these operations are the Bitcoin miners via Proof of Work (Proof of Work or simply PoW).
Proof of work is a mechanism used to give bitcoin miners the right to write transactions to a block, including the reward transaction that generates the new bitcoins. All the miners compete against each other, forcing their computers to try to find a unique number. To get that unique number, they have to make billions of attempts.
It is something similar to a lottery, which prevents the reward system from depending on the choices or votes of the participants. Rather, it is a system where anyone can participate with the guarantee that no one can be coerced, bribed or abused into making unilateral decisions. In this system, someone can be chosen at random to write a new logbook entry.
In other words, miners attempt to produce a hash that is less than or equal to the numerical value of the “target” hash, by modifying a single value called a “nonce”. Whoever finds this wins the lottery and gets the right to write a new entry in the register. Each time the nonce changes, a whole new hash is created, which is like resetting the lottery.
Because each hash created is random and impossible to predict, it can take millions of guesses – or hashes – before a miner hits the target and earns the right to populate the next block and add it to the chain. . This means that it is basically impossible to know who will win the lottery next time.
We can confirm that trust in the system is eliminated in this lottery, where anyone can participate. The reason is that anyone can create their own lottery ticket through proof of work. There is no governing body that selects the winners or generates the combination that entrants must achieve.
On the contrary, when someone wins the lottery, he just has to show his ticket to the rest of the participants to validate the veracity of his ticket and thus the reward is awarded. They just need to know what the target number or nonce is and verify that the winner’s ticket falls within the range of that number. Additionally, this ticket must be derived from the mathematical form of the transactions that the miner or participant wishes to add to the ledger.
But how to prevent a participant, a minor, from generating an infinite number of lottery tickets or from monopolizing the game? Create an expense. Mining Bitcoin and other cryptocurrencies requires participants to pay something for their tickets, in this case electricity. Therefore, the hash rate of a network is associated with a certain energy consumption.
Electricity in PoW
The work permit requires electricity. One of the premises of Bitcoin is that money cannot be created out of thin air, it must have a cost. Satoshi Nakamoto believed that electricity is a natural resource that can be created, is universal, infinite, and has a high cost.
Hashrate of a Bitcoin miner, farms and mining pools
When the hash rate of a cryptocurrency network is large enough, not a single Bitcoin miner can win the lottery that allows them to add transactions to the history and receive the reward. A single mining rig, no matter how powerful, would take a long time to perform the necessary calculations or attempt to get close to the target number.
Mining equipment is designed to solve complex mathematical calculations. They must be able to resolve hashes according to a specific hash function. As for Bitcoin SHA-256. A normal computer only resolves a few megabytes per second (MH/s). Let’s say a few million hashes in this second.
These specialized teams have evolved and as they evolve, they can solve more and more hashes per second. If we compare this evolution over time, we could see how, a few years ago, the most powerful computers went from resolving hundreds of megahashes per second to tens of terahashes per second (TH/s). That is to say billions of calculations during this period.
Currently, the latest generation of equipment is capable of solving one or two hundred terahashes per second. These computers are called ASICs and are designed to perform the sole task of resolving SHA-256 hashes.
Bitcoin mining equipment
Bitcoin mining equipment consists of a special chip. In terms of ASIC (Application Specific Integrated Circuit) kits, these are chips that perform a single task, usually based on a specific hash function.
It is necessary to take into account that not all networks require ASIC equipment to perform mining. Some networks like Litecoin, Ethereum Classic and earlier Ethereum can be operated with graphics cards, which can provide megahashes of calculations. These networks are of course much smaller in size than Bitcoin.
As growing hashrate increases the difficulty of finding the nonce or target number, miners often assemble multiple teams (sometimes hundreds or thousands) to increase their chances. It is known as a mining farm.
Mining with PC at the start of everything
It was not always so, in its origins Bitcoin could be mined with a simple computer, now it requires a specialized computer capable of solving millions of mathematical operations per second to find the specific nonce or hash.
In fact, competition among cryptocurrency miners is so fierce that most choose to join larger groups of cryptocurrency miners, known as mining pools. Through a mining pool, miners agree to add their computing power or hashrate as if it were a single unit. This way, the chances of earning the reward for mining a cryptocurrency increase even more.
When a pool succeeds in mining a block of transactions, the reward is distributed among its participants. This way we can see how the hashrate even affects the dynamics of the participants themselves, inviting them to cooperate with each other.
How is the Bitcoin hash rate measured?
The basic unit for measuring hashrate is KH/s. 1 KH/s is 1000 hashes per second. If we take as an example a Bitcoin mining network with a hash rate of 10 TH/s, we will talk about a capacity of 10 billion calculations per second.
How much does the Bitcoin hash rate cost?
Bitcoin’s hashrate has grown steadily, far more than any network that uses proof-of-work consensus. Between 2017 and 2018, the network experienced a 900% growth in hashrate. In the following years, the growth corresponded to 100% year after year. But in recent years, this growth has declined in percentage terms.
However, it should be noted that it was only between 2021 and 2022 that the network increased by almost 100 PE/s. Looking back, the same amount of computing power was collected during the first ten years of the network’s life. At the end of 2022, the Bitcoin hash rate was 250 PE/s.
1 kH/s is 1000 (one thousand) hashes per second.
1 MH/s is 1,000,000 (1 million) hashes per second.
1 GH/s is 1,000,000,000 (1 billion) hashes per second.
1 TH/s is 1,000,000,000,000 (1,000,000,000,000,000 US hashes) per second.
1 PH/s equals 1,000,000,000,000,000 (1,000,000,000,000,000 hashes per second).
1 PE/s is 1,000,000,000,000,000,000 (1 quadrillion) hashes per second.
Common hashrate conversions
1MHz/s = 1000kHz/s.
1 TH/s = 1,000 GH/s = 1,000,000 MH/s = 1,000,000,000 kH/s.
Hashrate is a fundamental concept that frames various aspects of the economic system of Bitcoin and other networks that support their proof-of-work security. In this way, we can estimate that the size of a network’s hashrate is proportional to its health.