All you need to know about hash rate in Coin Market SIG

All you need to know about hash rate

Hash rate chart is one of the most widely used terms in the world of digital currencies, especially Bitcoin. Decreasing and increasing hash rates have a dominant effect on the price of cryptocurrencies. The hash rate is related to the extraction of digital currency, such as Bitcoin. Various factors reduce and increase hash rates. Different aspects of this term will be accepted in article from Coinmarketsig.com.

What is a hash rate ?

To get acquainted with the hash rate and its relationship with Bitcoin and its functions, you must first get acquainted with the Bitcoin mining process. Bitcoin mining is a computer process with three main functions:

  • Release of new Bitcoins
  • Confirm transactions
  • Securing the Bitcoin network

While Fiat currencies are issued by central banks, new Bitcoins come into circulation by rewarding block miners to miners. To receive the reward, miners must use special hardware to solve complex mathematical calculations that produce a seemingly random hash or output of 64 characters.

Bitcoin miners use the SHA-256 encryption hash algorithm to find the hash number. The data that Miner enters into the SHA-256 hash function includes all current transactions that match the block size limit, the result of the previous block hash, and the nonce.

Nance is a random value that the miner changes in each hash attempt to obtain a new output. Even a small change in input creates a completely different output. Bitcoin miners are looking for zero-sum outputs. Bitcoin miners now have to find a hash that starts with nineteen zeros.

Miners have to work hard to get that number. Once the hash is found, the block is closed and added to the Blockchain. Miners, after successfully extracting a reward block in the form of a newly created Bitcoin, receive a transaction fee.

So what really hash rate is? A hash rate is the speed at which a miner reaches a hash or the number of times a hash function is calculated per second. As the number of Bitcoin miners increases, so does the hash rate.

What is hash rate and Speed Kilometer

What is the importance of hash rate?

The question now is, what does the hash rate matter? Hash rate is data according to which two things can be understood:

  1. Hash rate as a demonstration of network security

According to the hash rate, it is possible to understand how secure the network of extracting a currency password is. As a simple rule, the higher the hash rate, the more secure the network will be.

The reason is that in this situation, saboteurs will need much more power to carry out a 51% attack. Because having such power has the cooperation of hundreds of thousands of miners, it is highly unlikely that a destructive individual or entity could carry out such an attack alone.

As a result, many experts pay special attention to its global hash rate to determine the security of a currency code. In the past, several currency codes have fallen victim to 51% of attacks because their hash rates were so low that only one miner could take control of the entire network alone.

The probability of such an attack on the Bitcoin network being successful is virtually impossible because its global hash rate is extremely large and unattainable.

  1. Hash rate to calculate extraction difficulty

On the other hand, the hash rate is also used to calculate the extraction difficulty. Do not forget that the extraction difficulty is set after creating a certain number of blocks and depends on the time required to find or produce those blocks. For instance, the average time between creating Bitcoin blocks is 10 minutes.

The Bitcoin algorithm is programmed to reset the extraction hard block after each 2016 creation. In fact, the difficulty of Bitcoin changes almost every two weeks. why adjust the network difficulty? The good reason is that the addition of new miners will increase the strength of the Bitcoin mining network.

Thus, the global Bitcoin hash rate increases and the time required to create a new block decreases. This is because network miners can solve hashes faster and generate blocks faster at the desired time.

At this point, the algorithm that controls the Bitcoin extraction hardness adjusts the extraction hardness again to return the new block generation time to the specified 10 minutes. In this complex process, the hash rate is used to determine the amount of network power. This value is then used to modify the extraction hardness and increase or decrease it.

Hash Rates and Mining Hardware Companies

There is a lot of talk about digital currencies, and decentralization is often cited as one of their benefits. This is actually one of the hot topics in the cryptocurrency community for a variety of reasons. Currently, there are very few companies that have spent a lot of technical and hardware capacity to extract currency cryptocurrencies.

Companies such as Bitmain or Canaan have a large presence in the cryptocurrency of various currencies, especially Bitcoin. Yet, their activities are not limited to the construction of powerful ASIC miners, but they have gained a significant monopoly in this market by having giant mining pools.

The actual question is, are the mining hardware of these companies completely up-to-date? Do they keep the most powerful miners for themselves and only bring them to market after producing a newer generation?

In any case, these companies and their monopoly in the market put the decentralization of Bitcoin at risk. However, despite this situation, no serious problems have occurred for the Bitcoin network so far.

Relationship between hash rate and energy consumption

Another important point is the relationship between the hash rate and the total energy consumption of the Blockchain network. This relationship is very simple; the more power added to the Blockchain network, the higher the power consumption. Obviously, this high consumption has undeniable effects on the environment and cannot be ignored.

In fact, networks like Bitcoin have taken energy consumption to new heights. The latest expert calculations show that Bitcoin consumes as much electricity as the whole of Switzerland in one year, which is equivalent to about 65 terawatts per year.

However, that does not mean that Bitcoin wastes energy. In fact, Bitcoin energy consumption is negligible compared to processes such as gold mining or oil production. Apart from this discussion, the complex process of extracting Bitcoins and other cryptocurrencies such as Ethereum cannot be considered a waste of energy.

Nevertheless, these networks create unique systems that are the future of the global economy. So it is better to forget the myths about the energy consumption of Bitcoin and other cryptocurrencies and accept that every watt of electricity consumed was worth creating this free money. The question that needs to be asked is why governments are not trying to produce more renewable energy.

How to measure hash rate

The hash rate is a measure of the number of calculations per second and can be expressed in billion, trillion, quadrillion and quintillion (1000 to the power of 6). For example, a hash rate of 1 tera hash per second (TH/S) means that one trillion calculations can be performed per second.

These calculations are related to extraction. Extraction or mining is the process of verifying and adding transactions to a Blockchain network such as Bitcoin. People who extract digital currency often use specialized hardware that can do billions of trillion calculations per second. Miners receive a currency code reward for confirming and adding transactions.

In general, the more active miners a network has, the higher the hash rate of that network because more miners compete for rewards. The lower the number of miners, the lower the hash rate.

Bitcoin’s hash rate chart

What is the reason for decreasing and increasing hash rate?

Many factors can affect hash rates. Miners can decide what currency code to extract. Because mining involves cost (energy, hardware, time), miners tend to code the currencies that have the most potential return on investment.

High hash rates indicate more competition, but extraction bonuses continue to motivate miners. The Bitcoin hash rate for example, at some point reached 179 exits per second (1 exon equivalent to 1 quintillion), but the potential mining rewards continued to encourage miners to continue.

What happens if the hash decreases?

The hash rate is closely related to the price of Bitcoin and other digital currencies. Less hashes mean that less computing power is needed to calculate and add transactions to that Blockchain. This situation may cause the currency code to become centralized because fewer miners are needed to dominate the entire network.

The less decentralized a currency code is, the greater the risk. If a hacker can master a network, he can severely disrupt it. This is a big risk for investors and cryptocurrency platforms.

If the cryptocurrency hash rate is gradually or rapidly declining, cryptocurrency platforms may restrict the trading of that cryptocurrency or remove it from their list to prevent the destruction of their capital and customers.

What happens if the hash rate increases?

Higher hash rates mean that more computing power is needed to authenticate and add transactions to a Blockchain. This will increase the security of the currency code, as this will require more miners and more energy and time to dominate the entire network.

Hash rate, miners’ rewards and extraction difficulty

Hash rates, miners’ rewards, and extraction difficulty are all interdependent. As the difficulty of the Bitcoin network increases, a higher hash rate is required to extract/find the blocks, and as a result, the miners receive a reward of 25.6 Bitcoin blocks plus a transaction fee.

Interestingly, the difficulty of the Bitcoin network increases as more miners join the network, and so the hash power must increase (i.e., more computational effort per second must be found to find a solution). This interesting correlation is applied to the Bitcoin protocol itself, so that the average time for adding a new block will always be 10 minutes.

After reading this article by Coinmarketsig.com, you may be tempted to extract this currency code by providing computing power for the Bitcoin network, but you should know that this is a very costly and energy-intensive task that not everyone can do. Extraction requires a lot of money to provide hardware, pay heavy bills, and have enough computer knowledge.

What is the hashtag relationship with Bitcoin?

As you know, high hash rate means that miners enter the field of extraction, and this not only puts extra pressure on the extraction hardware, but also increases the extraction difficulty. Therefore, we can expect the price of Bitcoin to increase significantly with the hash rate increase, otherwise we may see the activity of many miners stop.

Because energy prices are still so high, miners must sell their Bitcoins above a certain price level to keep their business profitable. This practice can put a positive pressure on the price of Bitcoin. Considering the two main factors, it can be said that according to the security assumptions, there is a correlation between the hash rate and the price of the currency code.

In the following, we will try to answer the following questions about hash rate and price:

  • Is the hash rate of the Bitcoin protocol related to its price?
  • Why does a higher hash rate attract more long-term investors?

Bitcoin hash rate continues to grow. According to the logarithmic diagram of hash rate, it can be seen that Bitcoin hash rate has been clearly growing since the emergence of this currency code.

In addition, due to the adjustment of the mining difficulty, which was mainly in the ascending direction (the difficulty has increased), it is clear that Bitcoin mining has become more and more expensive because miners need resources to validate a block and receive its reward (Equipment and electricity) spend more.

It should also be noted that with the halving of the Bitcoin protocol reward and reaching 25.6 Bitcoins for each block of the price of this cryptocurrency increased significantly. Halving the extraction bonus, called halving, puts extra pressure on the price, which can take Bitcoin to new levels.

But is the Bitcoin hash rate related to its price? Why is it better for Bitcoin to increase hashtags despite raising transaction fees?

Bitcoin’s internal and external mining networks

Relationship between hash rate and Bitcoin price

First, there is a clear correlation between hash rates and Bitcoin prices. The hash rate is usually the main indicator of progress (except for the uptrend period 2012 to 2014 when the price started to increase before the hash rate).

Of course, this could be simply because this was the first time that the price of Bitcoin had risen and fallen exponentially (2011 to 2012). It was therefore difficult to predict whether the price would return to previous levels; In fact, the number of miners was drastically reduced due to the high costs of electricity and equipment and the declining profitability of the mining process.

After the price started to rise in early March 2013 and experienced a higher price level than its previous ceiling, the network hash rate clearly increased as people’s trust in Bitcoin took on a stronger color again.

To further prove this, we can examine the next bullish/bearish cycles. After the price slump in 2014, the Bitcoin hash rate continued to rise. The price took about two and a half years to reach its new all-time high (ATH) and once again surpass its hash rate.

Although at the end of 2018, the price of Bitcoin again entered a downward phase and reached the level of $4,000, but since then, the hash rate has increased and has been growing continuously.

In Conclusion

All in all, we can say that the cryptocurrency’s hash rate is the number of times that computers on the Bitcoin or Altcoins network process data to verify transactions and perform encryption that protects the network. The hash rate is an indicator of how healthy the network is at any given time and is mainly determined by the difficulty of mining and the number of miners. In general, having a high hash rate is considered a good thing.

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