This article presents the concept of hash rates and how they apply to the Bitcoin network.
What is Bitcoin Hash Rate?
In simple terms, the hash rate is a measure of how much processing power the Bitcoin network has at any given time. The process of mining involves solving difficult math puzzles. Solving these equates to successfully ‘hashing’ a block of verified transactions that is then added to the blockchain. The more attempts the network performs per second, the higher the hash rate.
Why is it important?
A higher hash rate is associated with higher levels of security. More processing power, naturally, requires more miners. For malicious attackers to be successful, they must control over 50% of the network’s mining power. If they did, these attackers would then have the ability to block new transactions and confirmations. Luckily, the more legitimate miners you have, the more difficult it becomes to coordinate a large enough group to carry a successful attack.
Another important concept to understand is that an increase in processing power does not mean that blocks are mined or verified any faster. Bitcoin is specifically designed to have blocks be mined about every 10 minutes. To maintain this rate, it simply increases the difficulty of its mathematical puzzles to match the increase in computing power.
Hash rate, difficulty, and mining rewards have a strong interdependence. As mentioned above, when difficulty increases so does the hash rate, and vice versa, in order to obtain the reward. However, through Bitcoin halving events, the reward is cut in half every four years. The combination of these factors plays a significant role in determining Bitcoin’s price. More computing power indicates stronger security, which then increases user and investor confidence. Halving events are also generally understood to raise prices as supply becomes more limited. Ideally, these increases would help mining remain profitable enough to maintain or increase hash rates once again.