Hash rate is one of the key metrics that is used to gauge the potential of a crypto network.

When a cryptocurrency’s hash rate rises, investors tend to anticipate that its value and adoption will skyrocket as well.

For example, the BTC price reached its ATH in April 2021, a time when the BTC hash rate was at its peak.

Also, it is used to wager on how decentralized and impregnable a blockchain is.

If you are looking to learn about the crypto hash rate, grab a glass of juice and read on for a straightforward explanation.

Post Summary

This is what I will cover:

• Definition Of Terms
• A Brief Background
• What Is Hash Rate?
• Understanding How Hash Rate Works
• What Hash Rate Means for POW Blockchains
• FAQs
• Conclusion

Let’s begin!

Definition Of Terms

• Hash: It is the product of a mathematical algorithm that takes an input of any length and converts it into an encrypted output of a fixed length. Generally, it helps to make transactions on the network immutable.
• Target hash: It is a hash that must be lower than or equal to the hash of the previous block on the blockchain in order for a transaction to be verified.
• Nonce: It means “number (0,1,2,3…) used only once”. Usually, miners randomly guess a nonce value to get a valid hash.
• Mempool: It is some sort of memory space where unconfirmed transactions are stored.
• Block: It is a block that contains information on verified transactions on the blockchain.

A Brief Background

To ensure that you fully grasp this concept, I will start off with a primer.

Hash rate is a term associated with mining on proof-of-work (PoW) blockchains like Bitcoin, Doge, Litecoin, etc.

In the crypto space, mining refers to the processes involved in verifying a transaction on a PoW blockchain.

For a transaction to be verified on this blockchain, a group of individuals known as miners needs to compete to solve a mathematical problem.

Usually, the math problem is to find the target hash.

To find this hash, miners take transactions from the mempool, the hash of the previous block, a nonce, and compute it using a hashing algorithm.

In the case of Bitcoin, the hashing algorithm SHA256 is used.

Each hash generated is determined by the nonce value used for the calculation.

Typically, due to the mining difficulty, each miner competes by randomly guessing different nonce values until the target hash is generated.

Only one miner who finds the target hash in about 10 minutes is eligible to verify the transaction and receive coins as a reward.

The average number of random guesses miners make when competing for a target hash is known as the hash rate.

Impressive, right? With this basic knowledge in hand, let’s formally discuss the hash rate in the next section. Scroll down!

What Is Hash Rate?

As hinted at earlier, the hash rate is the total number of guesses or hashes miners generate when competing to verify a transaction on a PoW blockchain.

In a technical sense, it refers to the combined computing power of miners in a specific blockchain network.

Hash rate is calculated by the number of hashes or guesses generated per second, according to a blockchain’s level of adoption.

On the Bitcoin network, for example, the hash rate is measured in THS/s (terahashes, or 1 trillion hashes per second).

However, smaller networks may be calculated in smaller units, such as kilohashes, megahashes, gigahashes, and so on, per second.

At the time of this post, in December 2022, the Bitcoin network hash rate is approximately 265 million terahashes per second.

Continue to the next section!

Understanding How Hash Rate Works

Here is how it works:

• Firstly, a blockchain network employs a hashing algorithm that randomly generates a hash code.
• Secondly, when transactions enter the mempool, miners use their computers to compete for a nonce value that will generate the target hash.
• Thirdly, the number of guesses made by miners per second is measured as the hash rate.
• Finally, when a miner generates the target hash, he is allowed to add the next block to the blockchain and earn crypto rewards.

So, why is hash rate important to a blockchain network, or what does it mean for it? You will find out in the next section

What Hash Rate Means for POW Blockchains

1. Blockchain security against a 51% attack

A 51% attack occurs when one miner or group of miners controls more than 50% of the hash rate of a network.

If this happens, the miner can manipulate or compromise the network.

On the contrary, hash rate is used as a key metric in assessing if a network is susceptible to a 51% attack or not.

A high hash rate makes it impossible for a 51% attack.

The reason is that a network is too big to overpower if it has a large number of miners actively verifying transactions.

However, a low hash rate indicates few miners and the possibility of a 51% attack.

2. The potential of a blockchain network

A blockchain’s potential can be assessed using its hash rate.

If a network has a high hash rate, it suggests that miners have faith in it because they are devoting a lot of time and resources to it.

In addition, the more hashing power a network has, the more likely investors are to be upbeat about adopting its native token.

Consequently, it is anticipated that the price of the coin would soar as more investors pour money into it.

Interestingly, some price analysts use the hash rate to analyze a coin’s price potential.

FAQs

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Conclusion

This is where we wrap up this post. I hope it was insightful.

In general, the hash rate reflects mining activities on a PoW blockchain. Also, it helps to project how decentralised a blockchain is.

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