Hash Rate Vs. Hash Power

Hash rate and hash power are two very important aspects of securing and verifying the transactions on a blockchain. What is the difference between the two? Why are they necessary for proof-of-work verified blockchains? We discuss this and more below.

So, What is Hash Rate?

Hash rate and hash power both relate to how a proof-of-work blockchain is able to be mined, and are critical components in the security of a blockchain. Hash rate is the unit measurement of processing power of a blockchain network, or how much total individual hashing power is being contributed in order to secure the network.

In the case of Bitcoin’s blockchain, the first blockchain and proof-of-work based network, the hash rate is used to algorithmically determine how challenging each equation or “puzzle” needs to be to verify the next block. The higher the hash rate, the more users or entities that are participating to try to secure the network, so the more challenging the “puzzle” needs to be. Hash rate is measured in hashes per second, so if a network has a hash rate of 5 TH/s, that means the network can make 5 trillion calculations per second in order to solve the next block’s “puzzle”. The different hash rate denominations are as follows:

• 1 kH/s is 1,000 (one thousand) hashes per second
• 1 MH/s is 1,000,000 (one million) hashes per second.
• 1 GH/s is 1,000,000,000 (one billion) hashes per second.
• 1 TH/s is 1,000,000,000,000 (one trillion) hashes per second.
• 1 PH/s is 1,000,000,000,000,000 (one quadrillion) hashes per second.
• 1 EH/s is 1,000,000,000,000,000,000 (one quintillion) hashes per second.

Then what is Hash Power?

Although the terms hash power and hash rate are sometimes used interchangeably, hash power refers to the computer’s calculation output that it will dedicate to securing the network. Hash power can vary greatly depending on what type of mining hardware is being used, with constant new innovations leading to miners with higher and higher hash power outputs.

Originally, since the hash rate of the Bitcoin network was so small, users could utilize their CPU in order to provide enough hashing power to have a good chance of verifying the next block and obtaining the mining reward. As the network continued to grow and the hash rate increased, CPU miners were no longer viable and GPU miners were implemented. Not long after that, GPU miners were made obsolete and high level mining computers called application-specific integrated circuits, or ASICs, took over as the best way to mine Bitcoin. To put in perspective how fast the sector grew and how much stronger miners are today, average CPUs’ can produce 10,000 hashes per second if the CPU happens to be a strong one; the Antminer S9, a modern piece of mining hardware technology that will probably be replaced soon, can produce 14 trillion hashes per second.

How is Hash Rate Measured?

Hash rate and hash power are both measured in the same way, and that is by using hashes per second. A single hash is a computation that converts different inputs of numbers and letter into an encrypted output, or more easily thought of as a single calculation used to try and solve the block equation. As more hash power is introduced into a network as more entities want to secure it and earn rewards, the hash rate goes up, making it more challenging for each entity to correctly guess the next output.

Currently, with the amount of hashing power being put into the Bitcoin network, hashing power is measured in terahashes per second (TH/s), which translates to how many trillions of computations per second can be done with the amount of hashing power in the network. Although it’s impossible to know the exact hash rate of the Bitcoin blockchain or any other proof-of-work network, the hash rate can be closely estimated based off of the current block difficulty and the number of blocks being mined. The Bitcoin network did not break 1 terahash per second until May of 2011, about 3 years after its inception; the current hash rate of the Bitcoin network is 120 million terahashes per second, making the network’s security 120 million times more secure than it was in 2011.

How is Hash Rate Distributed?

Since all you need to do to contribute to the security of the Bitcoin blockchain or any other proof-of-work blockchain is dictate hashing power towards the verification, anyone across the world can take part in verifying the blockchain as long as the have the proper equipment. This means that the hash rate of Bitcoin will be distributed globally depending on the amount of hashing power each area is putting towards the network. When you look at the current distribution of hashing power and global hash rate, it paints a very interesting picture on the geographical state of the blockchain network. The first thing that needs to be considered is that all of the major mining manufacturers are located in China; this factor, mixed with their notoriously low electricity prices in certain areas (especially during rainy season), gives China the perfect opportunity to dominate the Bitcoin mining process.

The most effective way to mine Bitcoin is by using a mining pool, or a group of miners who share their computing and hashing power over a single network and get rewarded based on the proportional percentage of power that each entity contributes regardless of whether or not the pool verified the block. Since it is hard for singular entities to compete against massive competitors, a mining pool allows smaller players to have a proportional reward. This also helps miners have a more predictable stream of revenue.

The three largest mining pools, Poolin, F2Pool, and AntPool, control almost 50% of Bitcoin’s entire hashing power and are all located in China. Although China is currently dominating the Bitcoin mining space, it is predicted more mining opportunities and hash power will be produced in lower electricity priced areas in America, such as parts of Texas. If a single mining pool controlled over 50% of the network’s mining power, than they could theoretically stage a 51% attack to completion.

Difficulty and Miners Rewards Explained

Since the level of security of a network strengthens as more hashing power is put towards a network, the difficulty to solve the next block in the chain increases proportionally with the increase in hashing power to keep the network secure. If the difficulty level did not change, then the introduction of hashing power would make it too easy to solve the “puzzle” to verify the next block, weakening the security of the network. The mining reward of a network is set up in a predetermined schedule, and drops over time if the cryptocurrency is deflationary.

When looking at Bitcoin’s mining rewards, you can see the reward drop in half, known as a “halving” every 210,000 mined blocks, about every four years. The original reward for verifying a Bitcoin block at the inception of the network was 50 BTC, but after its third halving in May 2020, the current reward is down to 6.25 BTC per mined block.

As it is becoming more difficult to mine Bitcoin because of so much increased competition and hashing power, many miners began to mine in pools, as explained above. In these mining pools, each miner dedicating hashing power to the network gets a proportional payout regardless of whether or not they actually contributed to mining a block. Since many of these mining pools are so large, they can estimate how much hashing power they contribute when compared to the rest of the network, and can estimate almost exactly how many blocks they will be able to mine compared to the rest of the market. This allows mining pools to create a reward schedule to consistently pay out participants whether or not they managed to mine the current block, as they know their statistical chances of mining future blocks and how much they will earn as a reward.

What Is A Good Hash Rate?

A good hash rate is subjective depending on the size of the network. It is better to have as high a hash rate as possible, as this means it would cost significantly more resources in hashing power in order to compromise a network.

When you look at the hash rate of the Bitcoin network, it has grown exponentially to a level many would have never guessed possible at its creation. When looking at the second most popular cryptocurrency, Ethereum, you see a current hash rate of approximately 200,000 GH/s or 200,000 billion hashes per second, much smaller than Bitcoin’s 120 million terahashes, or 120 million trillion hashes per second. To most cryptocurrency networks Ethereum is massive and would be considered an excellent hash rate, but when you compare it to the Bitcoin network’s hash rate, it is still significantly smaller.

What Hash Rate is Profitable?

The profitability of a hashrate depends on the mining difficulty of the network as well as the reward schedule, cost of mining hardware, and electricity costs. The higher the mining difficulty of a network, the more resources needed to be dedicated in order to compete for the block reward. If the reward for mining the block is high, then it makes it more financially suitable for people to dedicate resources in order to preserve the security of the network.

Another very important factor is the hash power output of your mining hardware. Although the Antminer S9 can produce 14 TH/s, it costs thousands of dollars and Bitcoin’s mining reward has recently dropped from 12.5 to 6.25 BTC per block. You also need to consider that the lower your electricity costs, the more cost efficient it is to run your mining hardware (as they consume large quantities of energy). The best way to determine if the current hash rate is profitable for you to mine on is by using an online mining profitability calculator, which will tell you your expected returns based off your hashing power, power consumption, electricity cost, mining pool fee, and block difficulty.

History of Bitcoin’s Hash Rate

The history of Bitcoin’s hash rate is one of exponential growth. Starting out humbly, the Bitcoin network now has a gargantuan hash rate of 120 million TH/s, which is 120,000,000,000,000,000,000 calculations per second. All of this hashing power is being directed from all over the world and has rose to represent over 0.21% of the entire world’s electricity supply. This level of power consumption continues to grow as more entities dedicate hashing power to the network, with energy consumption levels by the Bitcoin network being higher than the entire energy consumption of the country of Switzerland.

Bitcoin’s Current Hash Rate

Bitcoin’s current hash rate is 120 million TH/s which represents 120 million trillion hashes per second. If you assume every user mining on the Bitcoin blockchain uses an Antminer S9 with 14 TH/s, that would mean there are approximately 8.5 million Bitcoin mining units around the world. The actual number of miners around the world is probably much higher considering the expensive price tag and high hashing power from that specific piece of mining hardware.

Concluding Thoughts

Both hash power and hash rate are extremely important aspects of any proof-of-stake mined cryptocurrency, such as Bitcoin. The hash rate of Bitcoin has continued to grow at an astronomical rate, as well as the capabilities of ASIC miners and users working to verify the security of the Bitcoin network. Without hashes, blockchains would not be able to function as distributed ledgers, as the decentralized computing power would not be harnessed and directed to a specific function. Although there is a learning curve when it comes to cryptocurrency mining, it is a crucial part of the ecosystem and an important topic for every cryptocurrency user, investor, and trader to understand.