Hash rate, also referred to as hash power, is a fundamental part of any cryptocurrency utilizing a Proof-of-Work (PoW) consensus mechanism, such as Bitcoin. Hash rate is the measure of how fast a computer is completing an operation in a PoW network.
Essentially, hash rate is the rate at which a crypto miner (a computer, really) is working. The faster a miner is working, the higher the hash rate, and consequently the more likely the miner is to successfully complete the next block in the network and claim their reward.
High hash rate = happy miner.
In this article, we will look at:
- What is a hash?
- How does hash rate work?
- Hash wars!
What is a hash?
A hash is a set of data that has been mapped to a fixed size. If you hash data it will provide you with a string of numbers and letters. Changing anything in the data will completely change the hash output.
It’s a way of condensing a dataset while being able to verify data integrity. If you continue to use the same hash function, the hash output will remain the same length regardless of the length of the input.
In a Proof-of-Work cryptocurrency like Bitcoin, miners compete to solve a mathematical puzzle to validate the next block being added to the network’s blockchain. The data in each new block is stored as a hash.
Most miners use computers that are dedicated to mining. These computers work to complete a predefined task, which is usually searching for a long random number known as a “nonce”. This nonce returns the desired hash. The rest of the content in the block is predefined.
The difficulty of finding the hash, and therefore the nonce, can be scaled by increasing the amount of zeros required at the start of the hash.
This is how the Bitcoin network works.
How does hash rate work?
Miners guess a number they think might be the nonce, and when it is combined with the ordered transactions in a block, it is revealed whether or not the number is the nonce, depending on whether the hash output meets pre-defined criteria.
Every miner in the network is guessing to try to find the nonce to claim the reward.
Miners try different random numbers many times per second. Each time they guess a number, they must hash the contents of the block, along with the number they are testing, to see if they have found the desired hash value and therefore found the desired nonce.
The rate at which a miner can generate a new random number and hash it (with the rest of the block contents) to test if it is the correct nonce is known as the hash rate. Hash rate is measured in hashes per second (h/s).
If a miner has a hash rate of 100 h/s, they are completing 100 guesses for the nonce per second. This means that every second the miner is generating a random number and hashing it, along with the contents of the block, 100 times.
Hash rate can also be looked at from a network standpoint. Take Bitcoin for example. The overall hash rate of the network could be calculated by knowing the hash rate of every single Bitcoin miner in the world.
If the overall hash rate of a network increases, the difficulty of finding the correct nonce increases too because there is more competition.
You may have come across the term “hash war” when reading about hash rate. Hash wars are something that can occur when two forks of a chain compete to have the higher hash rate to try to prove themselves as the dominant chain.
Prior to the hard fork, Bitcoin SV supporters allegedly controlled more than 56% of the Bitcoin Cash hashpower. It was therefore thought, prior to the fork, that BCH SV would become the dominant chain, or the “real Bitcoin Cash”, purely in terms of hash power.
Once the fork was completed, things changed. On one side of the war, BCH SV proponent Craig Wright announced on Twitter that there would be “continuous competition until one dies as we do not stop”, referring to the hash battle between the two forks.
On the other side in the BCH ABC camp, Jihan Wu, co-founder of mining pool Bitmain, announced intentions to fight BCH SV using by switching some of Bitmain’s mining power from Bitcoin to BCH ABC.
Similarly, Bitcoin.com’s mining pool also announced they would utilize some of their mining power for BCH ABC instead of Bitcoin.
This hash war exists because each side wants to try to show their chain as dominant. However, as a consequence of this hash war, Bitcoin hash rate dropped by 6% as mining resources were allocated to mine the forks of BCH instead. Following this, Bitcoin broke the historic support of USD6000.
This content is not financial advice and should not form the basis of any financial investment decisions nor be seen as a recommendation to buy or sell any good or product. Trading cryptocurrency is complex and comes with a high risk of losing money, particularly if you trade on leverage. You should carefully consider whether trading cryptocurrencies is right for you and take the time to learn how trading works and decide how much money you are prepared to lose.
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