What is Bitcoin Hash Rate, & Why Does It Matter?

Bitcoin's hash rate just hit 260 (EH/s) exahashes per second!

This number might seem just like another Bitcoin statistic, but it's actually a very big deal for the Bitcoin network.

The hash rate is a measure of how much computing power is being used to mine new bitcoins, and it's one of the key factors that determines how secure the network is.

Here's a deeper look at what Bitcoin hash rate is, what can change it, and why it really matters.

What Is Bitcoin Hash Rate?

Bitcoin's hash rate is a measure of how much computing power is being devoted to adding new blocks on the network.

Basically, cryptocurrencies like Bitcoin are built on blockchain, which is a digital ledger of all transactions that have ever taken place on the network. So, if your friend were to buy a Bitcoin in Australia right now, the transaction will be recorded on this ledger.

Now, in order to keep this blockchain secure and ensure that new Bitcoins are created in a controlled manner, there needs to be a way to verify each transaction before adding it to the blockchain.

To do this, each blockchain network employs a hashing algorithm. In Bitcoin's case, it is SHA-256.

This hashing algorithm, for input of any size, will output a fixed-size alphanumeric code of 256 bits. This is called a "hash".

Now, each time a transaction is made on the Bitcoin network, all the computers that are part of the network (i.e. miners) will race to guess this hash value. The hash is solved only when a miner is able to guess a value that is lower than or equal to the target hash value.

Once the hash is solved, the winning miner will add the new block of transaction to the blockchain and receive a few Bitcoins as a block reward (this reward decreases overtime).

The hash rate of any blockchain network is thus determined by the number of these guesses that all the miners, over an entire network, are able to make per second.

So, a 260 EH/s Bitcoin hash rate means that the Bitcoin network is processing 260 quintillion guesses per second!

What Changes Bitcoin Hash Rate?

A variety of factors can affect Bitcoin's hash rate.

First, the number of miners on the network can have an impact. If there are more miners, then there will be more guessing power and the hash rate will go up. That's why, when Bitcoin was initially launched, it had a very low hash rate. But as more and more people became aware of the cryptocurrency and started mining it, the hash rate grew exponentially.

Second, the type of mining hardware being used can also affect the hash rate. For example, ASIC (Application-Specific Integrated Circuits) chips are purpose-built for mining cryptocurrencies and are much more efficient than regular CPUs or GPUs.

So, if more miners are using ASIC chips, the hash rate will go up. As Bitcoin miners advance in technology and switch to ASIC chips and advanced methods like cloud-mining allow more and more people to start mining, the hash rate will go up.

Finally, the difficulty of the hashing algorithm can also impact the hash rate. If the algorithm is made more difficult, then it will take longer for miners to solve the hash and find a new block.

The Bitcoin network adjusts the difficulty of the algorithm every 2016 blocks, or roughly every two weeks, to ensure that a new block is found every 10 minutes on average.

Why Does Bitcoin Hash Rate Matter?

Bitcoin's hash rate is important because it determines how secure the network is.

Higher hash rate means that there are more miners (and computers) involved in validating Bitcoin transactions. Resultantly, it becomes difficult for any single entity to control computing power large enough to tamper with the blockchain or launch a malicious attack such as a 51% attack.

A 51% attack is when a group of miners controls more than 50% of the network's total computing power and can, therefore, manipulate the blockchain to their own advantage.

For example, they could prevent new transactions from being verified and added to the blockchain or they could reverse recent transactions that they don't agree with.

So, a higher hash rate makes the Bitcoin network more secure and less susceptible to attacks.

Additionally, the hash rate can also be an indicator of the health of a cryptocurrency's network. If it’s going up, it means that more people are interested in the cryptocurrency and are investing in it. This usually leads to an increase in the price of the currency.

Conversely, if the hash rate is going down, it could be an indicator that people are losing interest in the cryptocurrency and are selling it off. This could lead to a decrease in the price of the currency.

In Conclusion

Bitcoin's hash rate is a measure of the computational power that is being used to validate transactions on the network.

A higher hash rate means that the network is more secure and less susceptible to attacks. Additionally, hash rate can also be an indicator of the health of a cryptocurrency's network. If the hash rate is going up, it usually means that the price of the currency will also go up.