What is a hash rate in cryptocurrency?

If you hope to become a cryptocurrency miner, you’ll need to understand hashing and hash rates, and why they are important in the cryptocurrency industry. We’ve already looked at hashing and how it works, and in this AAG Academy guide, we’ll explain hash rates, how they’re measured, and the role they play in the proof-of-work (PoW) mining process.

What is a hash?

A hash function is a mathematical algorithm that turns an input value of any length into an encrypted output, called a hash, of a fixed length. In other words, this process turns any piece of data, such as the data inside a block on the blockchain or a complete application, into a hexadecimal number of a predetermined length — regardless of its original size.

The size of the hash itself — or how many characters it is made up of — can vary depending on the hashing method used, and not every blockchain uses the same system. But regardless of its size, this process makes it nearly impossible to figure out or guess what the original input or original data was based solely on its encrypted hash.

Hashing isn’t a concept that was created by the cryptocurrency industry; it has been around for decades and is used for many different things, from data indexing to verifying that a piece of software is legitimate and has not been tampered with. However, since Bitcoin’s launch in 2009, hashing has played an integral part in keeping cryptocurrency secure.

Hashing is used not only to protect the data inside each block, but also to tie every block together. When a new block is created, the hash of the previous block is written into it. If the data inside a block changes, no matter how small the change may be, so does its hash. This ensures that if a bad actor tampers with a block, it will no longer be recognized by the network.

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What is hash rate in crypto?

It is a cryptocurrency miner’s responsibility to generate a valid hash when processing a new block. This is an incredibly intensive process that requires sophisticated hardware, especially for larger cryptocurrencies with competitive mining networks like Bitcoin. Only the miner who finds a valid hash, which usually takes many attempts, can claim the reward of new coins or tokens.

A hash rate is a measure of a blockchain network’s computational power. It is determined by how many attempts or guesses are being executed every second to find a valid hash. Popular networks with a large number of miners have a higher hash rate because they see more attempts, whereas smaller networks with fewer miners have a lower hash rate.

Why is hash rate important?

Hash rates are important for two key reasons. Firstly, they give us an indication of how secure a blockchain network is. The higher the hash rate, and therefore the greater the number of miners, the more difficult it is for bad actors to carry out a malicious attack by bombarding the network with illegitimate blocks. It simply requires too much power, which is incredibly costly.

Secondly, hash rates tell us how difficult it is for miners to validate new blocks. The higher the hash rate, the more competitive the network is, or the greater the number of miners you’ll need to compete against. What’s more, blockchains typically increase mining difficulty as their hash rate increases, which means that it takes even more attempts to find a valid hash.

Cryptocurrency blockchains with a particularly high hash rate, like Bitcoin, make it nearly impossible for individual miners with more traditional setups to compete because they require too much computational power. Instead, they are dominated by mining farms, which are essentially large buildings or warehouses filled with specialized mining hardware.

How is a hash rate measured?

That’s not to say individual miners can’t play a valuable role in some blockchains. Even a modest mining rig is capable of processing thousands of hash attempts per second, so even a “low” hash rate is actually very large in the grand scheme of things. As a result, when it comes to measuring hash rate, the industry uses some rather unique units of measurement.

These are:

• Hash = 1 hash per second (H/s)
• Kilohash = 1 thousand hashes per second (kH/s)
• Megahash = 1 million hashes per second (MH/s)
• Gigahash = 1 billion hashes per second (GH/s)
• Terahash = 1 trillion hashes per second (TH/s)
• Petahash = 1 quadrillion hashes per second (PH/s)
• Exahash = 1 quintillion hashes per second (EH/s)

The larger units of measurements typically only apply to larger blockchain networks. For instance, Bitcoin’s current hash rate, as of January 2023, is around 295 million TH/s, or 295 EH/s. In comparison, Litecoin’s current hash rate is around 684 TH/s. Zcash’s current hash rate is around 8.21 GH/s, and Dash’s current hash rate is around 1.96 PH/s.

Based on these figures, we can see that mining Zcash and Litecoin is considerably easier — or requires less computational power — than mining Bitcoin and Dash. If you’re interested in becoming a miner and you want to start out with a smaller cryptocurrency project, websites like BitInfoCharts and CoinWarz can help you compare hash rates for popular cryptocurrencies.

You may also want to look at the website WhatToMine, which helps you calculate the hash rate or computational power of your own computer or mining rig based on its GPU specifications. You can then see how profitable it may be to mine a long list of cryptocurrencies.

How does hash rate work in crypto mining?

As we touched on above, hashing plays a huge role in the cryptocurrency industry, particularly when it comes to the proof-of-work (PoW) consensus mechanism that is used by the vast majority of cryptocurrencies in existence today. To understand how hash rates are used in the mining process, and why they’re important, let’s look at the PoW system in more detail.

When a transaction is submitted to a blockchain that uses PoW, it joins a queue of requests that are waiting to be validated by the network. A group of transactions go into a new block, and miners start competing to provide it with a valid hash. This hash not only helps secure the block’s data, but it ensures that every block on the chain is linked and cannot be tampered with.

Every block gets its own unique hash, which is generated four key elements:

1. The block number
2. The nonce
3. The transaction data
4. The previous block’s hash

Three of these elements — the block number, the transaction data, and the previous block’s hash — cannot be changed, so miners generate new nonces over and over again until they end up with a valid hash that the network will accept. The network decides the hash requirements and these can change, depending on how difficult the network wants the mining process to be.

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Once a valid hash is found, the block can be closed, validated, and added to the rest of the chain. At this point, it is sent out to every other node on the network so that each one has an up-to-date copy of the entire database. This process also creates new cryptocurrency coins or tokens, which go to the miner who found the valid hash as a reward for their efforts.

Now that we understand the PoW mining process, it’s easy to see why hash rates are important. They essentially dictate how difficult it is, or how much computational power is required, to assign a unique and valid hash to every new block that’s created. Every cryptocurrency that uses the PoW consensus mechanism relies on this process.

References

• Hash
• Hash rate
• What is a good hashrate
• Bitcoin hashrate chart