Hashrate BTC: Understanding Its Importance For The Security Of The Bitcoin Network

All the technology surrounding the Bitcoin ecosystem continues to fascinate us. Every element and feature is important to ensure the proper functioning, safety, and decentralization of the network. This is the case with the hashrate, which is a measure of the total computing power needed by the Bitcoin network to validate new blocks. The hashrate is essential for the Bitcoin mining process. But what exactly is it? How does it work? And above all, what is it used for?

What is the BTC hashrate?

The hashrate refers to the processing capacity of the Bitcoin ecosystem to create a block. It is a very important concept in the security and decentralization of the blockchain network.

Definition

The hashrate is the overall computing power on a network aimed at validating new blocks in a chain at a specific moment. For the BTC ecosystem, this corresponds to the total capacity of the computers from all the mining farms combined. This value is expressed in hashes per second.

The hashrate only exists on blockchains operating on a Proof of Work (PoW) protocol. You will understand why this is an element of utmost importance for BTC miners.

It is also relevant to mention BTCST (Bitcoin Standard Hashrate Token). BTCTS is a cryptocurrency linked to Bitcoin’s processing capacity. It gives its holder the opportunity to participate in BTC extraction without having to own specific hardware intended for this purpose.

Hashrate and Bitcoin

The hashrate refers to the processing capacity required to verify transactions and generate new blocks on the Bitcoin blockchain. It is an important indicator for BTC miners. It corresponds to the number of hash calculations that participants can perform per second. Although it is volatile, this rate has significantly increased over the years, especially after each Bitcoin Halving event.

This naturally leads to an increase in mining difficulty. The latter implies that miners must have a higher processing capacity to solve mathematical problems and obtain block rewards. Note that this difficulty undergoes an automatic adjustment every two weeks to maintain the time for generating bitcoins at around 10 minutes.

Hashrate and Proof of Work

The functioning of the Bitcoin ecosystem relies on Proof of Work (PoW) and hashrate. Also called proof of work, PoW is a block validation mechanism that requires processing capacity to discourage malicious uses. In Bitcoin, PoW is used to validate transactions and mine new blocks through the mining process.

Participants must solve complex mathematical equations to validate a block. To do this, they need a sufficiently high hashrate. They then provide proof of a certain level of effort they have expended to validate a block, hence the term “proof of work.”

Importance of BTC Hashrate

The hashrate is an important value in a PoW blockchain ecosystem. It ensures the security of the network and that of transactions.

Hashrate and Network Security

In the token extraction process, participants must solve complex mathematical problems, which requires a high processing capacity. The miner who wants to solve the problem first must therefore have a significant processing capacity. Thus, a third party holding more than half of the total processing power can take control of the ecosystem. This risks severely damaging the integrity of the blockchain. This is called “51% attack risk” or “majority attack.”

However, the higher the hashrate, the more the network resists an attack. This thus helps to prevent any entity from monopolizing mining across the entire ecosystem. Its increase thus plays a security role as it would require exceeding the combined processing capacity of all honest participants to compromise the network. A high rate creates a security barrier against potential attacks by making them expensive and difficult to achieve.

Hashrate and Resistance to Censorship

A transaction is validated through the work of participants who validate blocks following a complex process. Once the transaction is confirmed and added to the blockchain, it becomes difficult to censor or invalidate it. The principle is the same as in securing the ecosystem.

The higher the hashrate, the more difficult it is to execute a censorship attack. It would require controlling a huge amount of computing power and thus considerable resources to succeed in such an attack. It would be all the more difficult to selectively censor transactions as honest participants continue to confirm uncensored transactions.

However, it should be noted that resistance to censorship is not absolute. Under certain circumstances, the ecosystem may be temporarily attacked.

What is the use of the hashrate?

It has numerous benefits for both miners and investors.

Measuring Competitiveness for Miners

In the process of extracting a new token, participants seek to solve mathematical puzzles as quickly as possible to validate a block first. They then compete, as the first to find the solution receives the reward in BTC. Having a good computing capacity allows for being faster. The hashrate allows the miner to assess the level of competitiveness, the cost of mining, and its profitability.

Indicating the Reliability and Health of a Blockchain for Investors

As we have seen earlier, a high hash rate helps to strengthen the security of an ecosystem. A blockchain with a high rate therefore indicates a good level of security. This is why Bitcoin is considered the most secure blockchain ecosystem.

Since its inception, it has never been the subject of a major attack. This rate can then indicate the motivation and trust of miners in the blockchain and its cryptocurrency.

Measuring Resources Dedicated to Mining by Geographic Area

The hashrate allows measuring resources dedicated to cryptocurrency extraction by country. A study by the Cambridge Center for Alternative Finance listed the leaders in the field in 2021:

• United States: 35 %;
• Kazakhstan: 18 %;
• Russia and Canada.

These countries surpassed China, which represented over 75% of the global Bitcoin hashrate in 2019. The reason for this change is the ban on mining activity in China in 2021. A better geographical distribution of this activity worldwide ensures the security and decentralization of the blockchain.

Measurement of Hashrate

Measuring the hashrate is important for both miners and investors. However, note that it should not be relied upon 100%, as in reality, it is very difficult to calculate accurately due to various factors.

How is the Hashrate Measured?

Generally, hashes per second (h/s) are used. In light of its continuous increase, rates are currently counted in trillions of hashes per second. It is also possible to use other units such as kilo, mega, giga, or tera, depending on the size of the hash.

Here is their equivalent in hashes per second (h/s):

• 1 kilohash (KH/s) equals 1000 h/s;
• 1 megahash (MH/s) equals 1 million h/s;
• 1 gigahash (GH/s) equals 1 billion h/s;
• 1 terahash (TH/s) equals 1000 GH/s;
• 1 exahash (EH/s) equals 1 million TH/s.

For clarification, 1 megahash/s means that a million hash calculations are performed each second.

Fluctuations in Hashrate and Their Implications

The hashrate is relatively volatile. It can indeed increase and decrease due to numerous factors such as the political environment, cost of energy and hardware, the asset price, etc.

For illustration, the total hashrate was below 1000 TH/s in January 2016. In 2021, it reached around 150,000,000 TH/s. In comparison, that of Litecoin during the same period was only 300 TH/s, which is 500,000 times less.

The increase or decrease in hashrate has several implications for the network:

• The security of the network is enhanced by its increase;
• Mining difficulty increases with the increase in the rate;
• Competitiveness among miners increases with the rise in the rate;
• Energy consumption is high when the rate is high.

Factors Influencing the BTC Hashrate

Many external factors to the blockchain impact its variation. It is therefore a dynamic measure that evolves based on policies, the economy, technology, and other factors.

Computing Power and Mining Equipment

The evolution of mining hardware has a significant impact on the hashrate. Indeed, the use of new mining equipment that is more powerful and efficient can lead to an increase in overall processing capacity. Previously, miners mainly relied on CPU processors and then on GPU graphics cards for BTC token extraction.

The introduction of application-specific integrated circuits or ASICs in this field has made it more efficient. They offer higher processing capacity, fueling a race for the most efficient equipment. The massive adoption of new mining technologies can thus increase the global hashrate.

Electricity Costs and Regulations

In addition to mining equipment, the cost of electricity is a crucial factor that can influence the variation of this rate. As you know, the token extraction process is very energy-intensive due to the significant computing power it requires. A change in electricity prices in a country can therefore have unpredictable and random effects on the hashrate.

Using less expensive energy sources like green energy can increase mining profitability. This, in turn, attracts new participants and thus increases the hashrate.

Finally, the last factor that can influence the hashrate is the regulation of mining activities in a country. A politically favorable or unfavorable environment for this activity can indeed encourage or deter participants. The ban on cryptocurrency mining in China in May 2021 caused this rate to drop by more than 50%. Similarly, the power outage in Kazakhstan in January 2022 due to protests in the country led to a decrease in it.

Conclusion

The hashrate is a very important measure to know when venturing into the world of cryptocurrencies. It is an important element of Proof of Work that determines how fast mathematical problems can be solved. It provides insights into the network’s security level, the difficulty of mining Bitcoin and the competitiveness of miners. This measure is quite volatile, as different factors influence its variation. But above all, remember that it is primarily a comparison tool, so it is recommended to interpret it with perspective.

Fitah

Je suis passionnée par les cryptomonnaies, un monde que j'ai découvert il y a peine 3 ans. Mon seul but est de vous informer de cet univers incroyable à travers mes articles.