Hash is a mathematical function that converts a file into a code of letters and numbers. It is also used as a metric unit in the world of cryptocurrencies and blockchain networks. The so-called “hash rate” is the main means used to scale the mining of digital assets, such as bitcoin (BTC), ether (ETH) and others. Next, I’ll explain more about how this rate is measured and its importance.
In the crypto market, every transaction carried out with cryptocurrencies is recorded on a blockchain network. This technology is supported by digital currency miners around the world. They use their computers to solve a multitude of complex math problems. Thus, every time a series of calculations is solved and its result is written to the network, a hash is generated.
What is hashrate?
In a nutshell, the hash rate (or hash rate) is a measure of the total processing power used by computers that are mining a cryptocurrency and recording transactions on a blockchain network. The unit can also be used to scale the speed at which mining machines are completing complex mathematical calculations.
In this sense, the security and integrity of a cryptocurrency’s network can be evaluated by its hash rate. From this measurement, it is possible to identify, for example, how many computers are being used to maintain the blockchain and how many hashes are generated in a given time interval.
According to Binance, the world’s largest cryptocurrency exchange, the hash rate is “an essential part of the mining process ” of bitcoin (BTC), for example. It also plays an important role in generating new digital wallet addresses and authentication keys.
To encrypt all this data, miners need to solve mathematical “puzzles”. Your computers process millions to trillions of attempts per second as to what the solutions might be. These are the hashes, codes formed by numbers and letters to represent a.
How important is the hash rate for cryptocurrencies?
The goal of each miner is to be the first to solve a block of transaction data. This method is called “proof-of-work”. Thus, miners are rewarded by the blockchain network with the generation of new units of a certain cryptocurrency, for example.
The hashes still need to be validated and authenticated by other miners, measuring whether the appropriate amount of processing power has been used to produce the code. After the hash referring to the data block goes through all these processes, it is then added to the blockchain network. Finally, the miner receives a reward in newly created cryptocurrencies.
“Blockchains need computers to process and validate their transactions,” David Kemmerer, CEO and co-founder of CoinLedger, told Business Insider. “The more computers that compete to validate transactions trying to solve the next hash, the more secure the network becomes.”
Bitcoin and ether, the two main cryptocurrencies on the market, use the “proof-of-work” method to validate and record data on their blockchains. Other popular digital currencies like bitcoin cash, dogecoin, litecoin and many others also use the same model to ensure the security of their networks.
The hash rate is extremely important for cryptocurrency miners. As they are constantly competing to be the first to generate a valid hash, they need their machines to solve the calculations as quickly as possible. For example, if the equipment used generates a lower hash rate than the competition, the miner will be rewarded less often.
How is the hash rate measured?
The hash rate is a measure of how many calculations can be performed per second. This number can be in the thousands, millions, billions, trillions, quadrillions and quintillions. Thus, they can be represented by the following units:
- KH/s (kilo): thousands of hashes per second
- MH/s (mega): million hashes per second
- GH/s (giga): billion hashes per second
- TH/s (tera ): trillion hashes per second
- PH/s (peta): quadrillion hashes per second
- EH/s (exa): quintillion hashes per second
The representation of the hash rate varies from blockchain to blockchain and miner to miner. It all depends on the number of machines and the speed of computers being used to maintain the network. Bitcoin, for example, uses the SHA-256 cryptographic algorithm to calculate hashes and measures the rate in exahashes per second (EH/s). The Ethereum network uses the measurement in terahashes per second (TH/s).
Why is hash rate important for investors?
In addition to being important for miners, the hash rate is highly valued by cryptocurrency investors. There is a relationship between crypto asset prices and hash rate, but it is not always clear. Digital currency values, for example, often impact hash rates, as Gabriel Wong, co-founder of Cyberdyne Tech Exchange, explained to Business Insider.
In addition, the hash rate brings a broader view of the activity of the cryptocurrency in question. This fee is one of the factors used to assess how many transactions are carried out, how many miners are active and how profitable mining is. All of this impacts transaction fees, charged every time a cryptocurrency is moved, for example.