Hash Rate
Hash rate and hash power both affect how a proof-of-work blockchain can be mined and are important aspects of a blockchain's protection. Hash rate is a unit of measurement for a blockchain network's computing power, or how much total individual hashing power is contributed to protect the network.
The hash rate is used to algorithmically calculate how difficult each equation or "puzzle" needs to be to validate the next block in Bitcoin's blockchain, the first blockchain and proof-of-work based network. The higher the hash rate, the more users or organizations are trying to protect the network, and therefore the more difficult the "puzzle" would be. Hash rate is calculated in hashes per second, so if a network has a hash rate of 5 TH/s, it means it will solve the next block's "puzzle" at a rate of 5 trillion calculations per second. The following are the different hash rate denominations:
1 kH/s is 1,000 (one thousand) hashes per second
1 MH/s is 1,000,000 (one million) hashes per second.
1 GH/s is 1,000,000,000 (one billion) hashes per second.
1 TH/s is 1,000,000,000,000 (one trillion) hashes per second.
1 PH/s is 1,000,000,000,000,000 (one quadrillion) hashes per second.
1 EH/s is 1,000,000,000,000,000,000 (one quintillion) hashes per second.
Hash Power
Although the terms hash power and hash rate are often interchanged, hash power refers to the portion of the computer's computation performance that will be dedicated to network security. Hash power varies significantly depending on the form of mining hardware used, with recent developments resulting in miners with ever-increasing hash power outputs.
Since the Bitcoin network's hash rate was so low at first, users could use their CPU to have enough hashing power to have a reasonable chance of verifying the next block and earning the mining reward. CPU miners were no longer feasible as the network grew and the hash rate increased, so GPU miners were introduced. GPU miners were quickly rendered redundant, and high-level mining computers known as application-specific integrated circuits, or ASICs, became the most efficient way to mine Bitcoin. To put in perspective how quickly the industry expanded and how much stronger miners have become, average CPUs can produce 10,000 hashes per second if the CPU is powerful enough; the Antminer S9, a new piece of mining hardware that will likely be replaced soon, can produce 14 trillion hashes per second.
How Hash Rate is Measured?
Hash rate and hash power are both calculated in the same way, with hashes per second. A single hash is a computation that transforms various numerical and alphabetic inputs into an encrypted output, or more simply put, a single calculation used to try to solve the block equation. The hash rate increases as more hash power is added into a network because more entities want to protect it and win incentives, making it more difficult for each entity to correctly guess the next output.
Hashing power is currently calculated in terahashes per second (TH/s), which corresponds to how many trillions of computations per second can be performed with the sum of hashing power in the network. While knowing the exact hash rate of the Bitcoin blockchain or any other proof-of-work network is unlikely, the hash rate can be closely calculated using the current block difficulty and the number of blocks being mined. The Bitcoin network did not crack 1 terahash per second until May 2011, nearly three years after its inception; the network's current hash rate is 120 million terahashes per second, making its security 120 million times more stable than it was in 2011.
How Hash Rate is Distributed?
Since all you need to contribute to the protection of the Bitcoin blockchain or any other proof-of-work blockchain is to direct hashing power toward verification, everyone in the world can participate in blockchain verification as long as they have the necessary equipment. This means that Bitcoin's hash rate would be distributed internationally based on how much hashing power each region contributes to the network. When you examine the existing distribution of hashing power and global hash rate, it paints a fascinating image of the blockchain network's geographical condition. The fact that all of the major mining manufacturers are based in China, combined with their notoriously low electricity prices in some areas (especially during the rainy season), provides China with the ideal opportunity to dominate the Bitcoin mining process.
The most efficient way to mine Bitcoin is to use a mining pool, which is a group of miners who pool their computing and hashing power and are compensated based on the proportional percentage of power that each individual contributes, regardless of whether or not the pool validated the block. Since competing against large rivals is difficult for single companies, a mining pool enables smaller players to receive a proportional reward. This also allows miners to have a more consistent revenue source.
Poolin, F2Pool, and AntPool, the three largest mining pools, manage nearly half of Bitcoin's hashing power and are all based in China. While China currently dominates the Bitcoin mining industry, it is expected that lower-cost electricity areas in America, such as Texas, will generate more mining opportunities and hash power. A 51 percent attack could potentially be carried out if a single mining pool held more than half of the network's mining resources.
Difficulty and Miners Rewards Explained
Since the difficulty of solving the next block in the chain increases proportionally with the increase in hashing power used to keep the network safe, the difficulty of solving the next block in the chain increases proportionally with the increase in hashing power used to keep the network secure. If the difficulty level remained unchanged, the addition of hashing power would make solving the "puzzle" to verify the next block much too simple, weakening the network's stability. A network's mining reward is set on a preset timetable, and if the cryptocurrency is deflationary, it decreases over time.
When it comes to Bitcoin mining incentives, every 210,000 mined blocks, or around every four years, the reward is cut in half, known as a "halving." At the start of the network, the reward for verifying a Bitcoin block was 50 BTC, but after its third halving in May 2020, the new reward is 6.25 BTC per mined block.
Since mining Bitcoin has become more difficult due to increased competition and hashing power, many miners have started mining in pools, as stated above. Each miner contributing hashing power to the network receives a proportional payout in these mining pools, regardless of whether or not they actually contributed to mining a block. Because all of these mining pools are so big, they can predict how much hashing power they add to the network and how many blocks they will be able to mine relative to the rest of the market. Since mining pools know their statistical chances of mining future blocks and how much they can receive as a reward, they may build a reward schedule to regularly pay out participants whether or not they managed to mine the current block.
A Good Hash Rate
Depending on the size of the network, a successful hash rate is subjective. It is preferable to have a high hash rate because compromising a network would cost considerably more money in terms of hashing power.
When you look at the Bitcoin network's hash rate, you'll notice that it's risen exponentially to a degree that few could have predicted at its inception. Ethereum, the second most common cryptocurrency, currently has a hash rate of about 200,000 GH/s, or 200,000 billion hashes per second, which is significantly lower than Bitcoin's 120 million terahashes, or 120 million trillion hashes per second.
What Hash Rate is Profitable
The profitability of a hashrate is determined by the network's mining complexity, as well as the reward schedule, mining hardware costs, and energy costs. The higher a network's mining difficulty, the more energy must be dedicated to compete for the block reward. If the reward for mining the block is high, it is more financially feasible for people to devote resources to maintaining the network's stability.
Another significant consideration is your mining hardware's hash power output. Although the Antminer S9 can produce 14 TH/s, it is expensive, and Bitcoin's mining reward has recently fallen from 12.5 to 6.25 BTC per block. You should also keep in mind that the lower your power costs are, the more cost-effective your mining hardware would be (as they consume large quantities of energy). The easiest way to figure out whether mining at the current hash rate is profitable for you is to use an online mining profitability calculator, which will calculate your projected returns based on your hashing power, power usage, energy cost, mining pool charge, and block difficulty.
Conclusion
Any proof-of-stake mined cryptocurrency, such as Bitcoin, requires both hash power and hash rate to function properly. Bitcoin's hash rate, as well as the capabilities of ASIC miners and users working to verify the network's stability, has continued to rise at an astronomical rate. Blockchains would be unable to act as distributed ledgers without hashes, as the decentralized computing capacity would not be harnessed and guided to a particular purpose. While cryptocurrency mining has a learning curve, it is an essential part of the ecosystem and a subject that every cryptocurrency consumer, investor, and trader should be aware of.
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