All you need to know about HashRate

 

HashRate or hash output rate is a function of hash and in bitcoin, HashRate is the speed of completion of computational operations in bitcoin code. The higher the HashRate during mining, the better, because the chances of finding the next block and receiving a reward increase.

If you want to enter the field of mining, it is very important to know the concept of HashRate and its importance. You should also be aware of its effects on the mining capacity of coins. Having enough knowledge about hashtags can help you make the best possible mining decision. In this article, we will look at what HashRate is, how important it is, and how electricity costs affect profitability.

What is HashRate?

Simply put, a HashRate is the speed of a mining machine. Digital currency mining involves finding blocks through complex calculations. Blocks are similar to mathematical puzzles. Mining machines have to make thousands or even millions of guesses per second to find the correct answer to solve the block.

In other words, to effectively mine a block, the miner must hash the block header so that it is less than or equal to the target. As the difficulty changes, so does the goal. To reach the desired hash (or target), the miner must change some block headers called nonces. Each nance starts with “0” and increases to reach the hash (or target) necessary.

Since the change of nance is completely random, the probability of achieving the desired hash (or goal) is very low. So Miner has to work hard to change Nance. The number of times a miner tries to reach a hash per second is called a HashRate or hash power.

Measure the HashRate and its units

The unit of measurement of HashRate is hash per second h/s. Some common terms used include mega, giga and tera, which are based on the number of hashes.

For example, a device with a speed of 60 hashes per second makes 60 guesses per second when trying to solve a block. KH / s is used for 1000 hashes per kilo, MH / s for 1000 kilos, MH / s for 1000 MHz and PH / s for 1000 kilos.

Different devices used to mine different digital currencies do not have equal hashes; For example, a bitcoin mining machine has a different HashRate than an atrium mining machine. This can be explained by the different algorithms that digital currencies use; because the same amount of memory and calculations are not used to mine them.

Relationship between HashRate, mining profitability and difficulty

HashRate, miner profitability and mining difficulty are interrelated in several ways. Take bitcoin, for example. Each time the bitcoin network hardens, the HashRate increases, and as a result, the miner earns a number of bitcoins and transaction fees. The number of miners in the bitcoin network increases the difficulty; Because Miner has to calculate more guesses per second.

Impact of electricity consumption on profitability

For profitability, we consider bitcoin. Currently, a bitcoin mining machine such as ASIC has a mining power of approximately 12 mins per second. Given the current difficulty of the network, this device can generate 0.318 bitcoins per year.

However, when calculating profitability, you should consider the cost of electricity consumed by mining equipment. This is called the Miner efficiency. The increasing difficulty of digital currency mining also increases electricity costs.

For example, one mining device with 10% more HashRate consumes 50% more power than another device. Therefore, although HashRate is an important factor in mining, you should always consider efficiency as well.

The Impact of Network Hardness on Bitcoin Fees

After 32 Hawing, the block reward is equal to the minimum bitcoin unit (one satoshi) and after that we will no longer have Halving. This means that the block reward is then completely eliminated (if the block production intervals are 10 minutes, bitcoin mining will no longer be rewarded in 2140). The first 14 cycles of hawing and rewards in bitcoin are shown in the figure above.

Now let’s look at what would happen if the Bitcoin network did not have a network hardness adjustment mechanism and the network difficulty was constant.

If the hardness of the bitcoin network had been relatively high, early mining would have been very expensive and blocks would have been built very slowly from the beginning; obviously, this was not ideal for setting up a new network, and it could mean that the Chinese block was not successful in the first phase.

On the other hand, if the initial hardness of the network was determined to be relatively low, as more miners joined the network, the distances between the blocks would be shortened and the blocks would be built at increasing speed, resulting in problems with the bitcoin supply schedule; If this were to happen, the network would not have had enough time to identify and develop the market for the world’s first cryptocurrency. As a result, block rewards ran out much faster, and miners lacked sufficient incentive to mine and process transactions and thus secure the network.

In short, in order to extend the bitcoin supply schedule, the block generation distance must be relatively constant, which in turn is needed to motivate miners to join the network over a relatively long period of time, as well as the gradual development of the cryptocurrency market.

A mechanism has been implemented to adjust the bitcoin network stiffness to ensure that block intervals remain relatively constant over decades. As you can see in the figure below, even with this internal hardening mechanism, the distances between the blocks were not very stable, and in the first year of Bitcoin launch, the time interval between the blocks was on average more than 10 minutes. The distances between the blocks became more stable in July 2010 (July 89) after the first bitcoin price was set, and the distance between the blocks has been less than 10 minutes for more than 5 years (there is no increasing or decreasing trend in the orange chart).

Bitcoin network hardness adjustment mechanism

To mine bitcoins, miners use very special devices to guess a certain number. When a miner finds the number of nans that the network is currently looking for, that miner gets the right to create a new block in the Bitcoin blockchain, receives the block reward, puts the transactions in the block, and the transaction fee. Obtains. At the time of writing, it is estimated that the total bitcoin network hash (the total computing power of all miners operating in the bitcoin network) is 132 exegeshes per second, or 1022 × 13 hashes per second.

In the first year of Bitcoin launch (2009), bitcoin mining was possible with CPU. because the network HashRate was only a few million hashes per second. Over time, more computers joined the network, and later chips using GPUs (graphics cards) were used for mining, and finally, today, BTC mining hardware known as Asic is used. It becomes.

As you can imagine, with the increase in network hash multiplication by several trillion since the first year, it has become much more difficult for miners to guess the nonce number within 10 minutes.

As you can imagine, with the increase in network hash multiplication by several trillion since the first year, it has become much more difficult for miners to guess the nonce number within 10 minutes.

The relationship between bitcoin network stiffness (14-day moving average), HashRate, and block intervals over the past three months is shown in the figure below. During the first period of hardness adjustment (red column on the left), the HashRate was decreasing (downward trend on the black line). As the grid capacity decreases, the distances between the blocks increase (upward trend in the blue line) and therefore the need to reduce the grid stiffness (slight decrease in the orange line after this period) is essential.

In the third period of hardness adjustment (the first green column from the left), the HashRate increased again, the blocks entered faster than the program, and the bitcoin network hardness increased three times as much as before. In mid-April 2021 (right red column), a power outage occurred in China, causing a sharp drop in the BTC network HashRate and a sharp slowdown in blockchain creation; Therefore, network stiffness decreased during this period.

After this (the green column on the right) reduced the difficulty of the grid, it made it much easier for the miners to recreate the blocks; As a result, some miners with poor hardware could benefit from mining again. In fact, with the addition of more miners, the sharp decrease in the previous HashRate is compensated and brought to the highest new level.

The last period of hash reduction and recovery is a good example of why reducing miners in one period does not lead to a hierarchical reduction of other miners. Rather, it encourages new miners to join the network. This mechanism is an incentive for other miners to join the network while maintaining the profit margins of miners.

The relationship between Bitcoin network complexity and transaction fees

The side effect of this mechanism that we all feel is its effect on transaction fees. At times when the Hashrate increases and the blocks are built faster than planned (green columns in the figure), transactions can be placed in the blocks more quickly. This means that fewer transactions are in the queue and therefore the cost of confirming them can be relatively low.

The opposite is true during periods when the HashRate decreases and the block intervals increase (red column in the figure below). When blocks are created at a slower rate, the queue for pending transactions becomes longer, and users must increase fees to make their transactions faster. Similarly, the impact of network hardness on bitcoin fees increases, and this problem should subside in the next hardness adjustment period.

In this section, we talked about the impact of network hardship on bitcoin fees. For those who intend to make transactions on the Bitcoin network, it may be important to note what fees the transactions that are still waiting in line for future blocks have been offered for approval.

What is a Mempool?

As briefly mentioned above, the bitcoin encapsulation can be described as the total number of transactions that have been requested but are still waiting in the next blocks. Technically, each of the thousands of Bitcoin nodes on the network has its own Mempool. But since the nodes are mostly well connected, it might be appropriate to visualize them as a waiting room.

Mempool.space is a standard website that provides important information about Mempool to users. Information such as the total queue size (ampule size), the number of transactions joining the queue (incoming transactions), whether blocks are arriving faster or slower than expected (network hardness estimation), and estimating what the transaction fee should be to have a high, low or medium priority transaction.

The figure below shows the chart of the three months ago. As you can see, the patterns described in the previous figure can also be seen here. Between late February and early April 2021 (April 1400), as the bitcoin HashRate increased and more blocks were created, the Mempool size decreased and the transaction fee decreased, respectively. After the HashRate dropped in mid-April, the size of the mumble increased rapidly and transaction fees skyrocketed again; But both fell sharply after adjusting for hardship on April 30 (1400) and the subsequent growth of the HashRate to its highest level.

In conclusion

As briefly mentioned earlier in this article, with the Bitcoin Network Hardness Adjustment Mechanism, the network’s block rewards disappear over time, creating a healthy market where transaction fees become the main source of miners’ revenue, motivating Miners are essential for processing transactions and thus securing the network in the long run; This is probably the most important challenge that awaits Bitcoin in the future.