The financial market is a dynamic environment that goes through ups and downs in cycles. The…
Hash power relates to the computational power used in mining.
One hears the term ‘mining’ frequently when discussing Bitcoin. But, there are elements that make up the mining process. More importantly, crypto beginners need to familiarize themselves with these elements for them to better understand what mining is all about.
In this blog post, we will explain about hash power in the simplest way possible.
Crypto Hash Power Meaning
First, let us define what a hash is. The hash is a randomly generated alphanumeric code. Next, hashing involves guessing what the code is. Those that the computers submit to the network all undergo monitoring and measuring. Lastly, the hash rate refers to the number of guesses every second that occur all over the network.
Correspondingly, the hash power refers to computational power that one’s machine uses in solving the multiple hashing algorithms that run throughout the network. However, hash power and hash rate are interchangeable terms in describing the computational capabilities of a mining rig.
Simply put, the hash power of a mining rig refers to the hashes that it calculates in a second.
Importance of Hash Power
The hash rate is important because it evaluates the computing power of a blockchain network. The number of successful guesses that a computer can make per second is the hash rate. This process is essential in the Proof-of-Work (POW) mechanism.
Hash rates are helpful for miners in determining their profitability. Smaller blocks need lesser resources for validation or ‘hashing’. Furthermore, different cryptocurrencies require different kinds of mining equipment. Various levels of speed, power and memory contribute to successful mining of cryptographic hashes.
These are all important things that miners have to consider before going deeper into the process.
Prevention of Attacks
For example, if Bitcoin’s hash rate continuously increases, it would mean a more secure network for its participants because the Bitcoin network’s hash rate is high and malicious investors will have a difficult time disrupting the network. One example is reversing their payments.
A low bitcoin hashrate makes the Bitcoin network vulnerable to cyber criminals. Thus, the probability that a 51% attack will occur is high. Additionally, a low hash rate decreases the decentralized nature of a specific cryptocurrency.
This may prompt crypto investors to pull out and stop trading. This is why a high hash rate is seen as a good sign in POW mechanism because it means that control is distributed among its users. In turn, that translates to a more secure network.
Effect of Hash Power on Bitcoin’s Price
Somehow, there is a correlation between Bitcoin hash rate and its market price. Mining difficulty refers to the difficulty that miners experience in generating a hash that falls below the targeted hash. This is usually achieved by decreasing the numerical value in the hashed block header.
Moreover, the network difficulty can substitute for the total mining power. In case the bitcoin hash rate is declining, the increasing difficulty can make up for it.
However, not all crypto investors and enthusiasts believe that the hash rate does not impact Bitcoin’s price because the number of mining pool operators is not enough to control the market price. In addition, Bitcoin’s supply and the fierce competition can influence miners to act in a different manner with regard to block rewards and processing transactions.
There are still new miners that join the Bitcoin network until today because of the huge potential of its price. If you are a beginner in cryptocurrency with an interest in mining, remember that cryptocurrencies can no longer be mined with just a desktop or laptop. You will need to invest in special equipment to carry out the mining process.