Bitcoin Hash Rate Explained

Investing
Updated: 12th Nov 2021
Written by Sean Graytok
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November 12, 2021
Written by Sean Graytok

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This article will define hash rate and explain its vital role in the Bitcoin network.

What is Hash Rate?

Hash rate is the measuring unit of the processing power of the Bitcoin network.

Bitcoin miners conduct complex mathematical operations to secure the blockchain.

The number of calculations miners can perform is measured in terahashes per second (TH/S), where “hashes” refer to the output of the miners’ computations, and the prefix “tera” denotes one trillion.

The more calculations per second miners can make, the more secure the blockchain becomes.

Miners with higher hash rates are more likely to earn bitcoin block rewards, which are the payments the protocol makes to the miner for successfully securing the blockchain.

Miners can increase their hash rate by procuring more mining machines or developing new technologies that enable them to make more computations and better optimize energy expenditures.

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Understanding Hash Rate

Bitcoin is a decentralized network of computer nodes that is cryptographically secured by a proof-of-work consensus mechanism.

The tradeoff to decentralization is that thousands of participants, who do not know each other, have to agree that the transactions in the block are valid.

The protocol achieves this network consensus by requiring the participants to show proof of work and race to solve arbitrarily complex mathematical puzzles to verify a block.

Solving these cryptographic puzzles requires expensive, specialized hardware and large amounts of computing power.

Effectively, the machines are conducting brute guesswork to generate a hash that satisfies the protocol.

Hash rate boils down to the number of guesses per second a miner can make to solve these complex mathematical problems.

The higher the hash rate, the more guesses that can be made per second, the higher probability of guessing a correct solution to the puzzle, the higher the likelihood of earning a block reward.

Hash Rate Special Considerations

The Bitcoin protocol prefers that blocks be added to the blockchain every 10 minutes, on average.

If miners are solving puzzles and confirming blocks faster than this 10-minute interval, the protocol will adjust the difficulty of the puzzles to make them harder to solve.

Increasing the difficulty of the computation means that more work must be shown on behalf of the miners, ultimately slowing down the rate of mining to get it closer to the desired 10-minute pace.

The adjustment works the other way, too. If the network takes longer than 10 minutes to append a new block to the chain, the protocol makes mining easier.

The difficulty adjustment either incentivizes the hash rate to come online or disincentivizes it to remain online.

Increasing the difficulty reduces the likelihood of earning a block reward, so miners with insufficient hash power to effectively compete will drop offline.

It’s in their best economic interest to do so — there’s no point in running the expensive hardware and paying for the electricity if there’s no chance of earning a block reward.

Decreasing the difficulty increases the likelihood of earning a block reward, encouraging additional miners to join the network and bring their hash power back online.

Hash rate and mining difficulty are beautifully governed by economic incentives.

Hash Rate Charts and Statistics

A regular PC used to provide enough hash power to mine.

In fact, Bitcoin’s creator Satoshi Nakamoto singlehandedly mined +22,000 blocks, earning a total of approximately 1.1 million BTC in block rewards/

But as the network grew and increased the financial incentives of mining, special hardware specifically engineered to mine Bitcoin was created.

Today, large-scale mining operations exist all over the world. There are even publicly-traded companies listed on the Nasdaq with one goal: mine bitcoin.

The chart below shows the network’s logarithmic growth of total hash rate over Bitcoin’s lifespan:

Hash Rate for Bitcoin

As of this writing, the network’s total hash rate is around 160 million terahashes per second.

Hash rate has trended upwards since Bitcoin was first created, which also means the network’s security has improved with each passing year.

However, the network was tested in June 2021 when China banned bitcoin mining, essentially erasing 52% of the network’s hash rate overnight:

Bitcoin Hash Rate

The resiliency of the Bitcoin network proved itself once again and has since returned 95% of hash power following the ban:

Bitcoin Total Hash Rate

As China-based miners packed up shop and began their migration to mining-friendly regions, North American miners jumped at the opportunity to provide the hash power to secure the network and earn block rewards.

The China mining ban has dramatically improved Bitcoin’s decentralization, considering China accounted for over three-quarters of all Bitcoin mining at its peak just a few years ago.

A higher hash rate means a more secure network. But that statement required some nuance before the ban.

Today, a rising hash rate across a more decentralized network means a more resilient and censorship-resistant network.

Hash Rate and Security

A nefarious actor would need to assemble more hash power than all the honest nodes combined to take over the network and double-spend coins that they do not own.

But an increasing and more decentralized hash rate make this event highly unlikely.

A rising hash rate makes it harder to mine a block, which lowers the probability that anyone miner will solve the puzzle and get their block confirmed by the network, let alone getting consecutive fraudulent blocks accepted by the network.

These puzzles are hard to solve, but proposed solutions are easy to verify, so invalid blocks that are broadcasted to the network are quickly ignored by other miners.

Miners are economically incentivized to ignore fraudulent blocks because it’s wasteful to expend hash power building on a forked chain that the rest of the network will soon reject.

This encourages nodes to stay honest.

A malicious actor will be unable to hijack the network unless they control 51% of the hashing power.

This was a possibility in the early days of Bitcoin when the total hash rate was exponentially lower, and the CPU from a PC was sufficient to mine, but it’s essentially impossible to do today.

The industrialization of the industry, in addition to the growing scarcity of the equipment, makes the likelihood of commandeering 51% of current hashing power very low.

In sum, more hash rate leads to more security, making it less likely that an attacker, or group of attacks, could compromise the network.

Hash Rate: Frequently Asked Questions

What is a high hash rate?

The current hash rate is around 160 million TH/s, 11% off its all-time highs before China banned mining last summer. The Hash rate has trended upward every year since Bitcoin’s inception.

Is a high hash rate good?

A high hash rate is good for the security of the Bitcoin network because it means more energy is being expended to maintain the integrity of transactions.

How is hash rate calculated?

Bitcoin’s exact hashing power is unknown. Hash rate is estimated from the number of blocks being mined and the current block difficulty.

What is a hash rate per second?

A hash rate per second is the measurement used to determine the computing power of a given miner or of the entire network. It is essentially the number of guesses per second that can be made to successfully solve the cryptographic problem required to mine a block.

Bottom Line: Hash Rate Definition

Hash rate is the amount of energy that’s expended to secure the Bitcoin network. The economic incentives of the mining industry can be distilled into this single number.

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This article is for informational purposes only. It is not intended to be investment advice.

Sean Graytok
Sean Graytok
Sean is a student of the financial and technology industry. He is interested in the people and companies who are driving the innovation that will change our future.