Hash Rate: Definition and Significance
If you are already mining cryptocurrencies, you already know how vital the hash rate is. If you are planning to mine cryptos, you have to understand what it is, why it’s significant, and its effect on how you mine the currencies. Having a good understanding of the hash rate enables you to make the best decisions when you begin mining.
What is a Hash Rate?
Also called the hash power, the hash rate refers to how fast a mining machine runs. When mining cryptocurrency, you need to create blocks using complex computations. These blocks are complicated mathematical puzzles; solving a single one takes thousands or millions of guesses before you see the right answer.
In crypto language, the miner needs to hash the block’s header so that it is equal to or below the target. To get to a particular target, the miner will have to vary the block headers constantly by the smallest possible portion called a nonce. The nonce always starts with 0 and every time a miner obtains the required hash or target, the number of zeros also increases.
The process becomes even more difficult because the target changes as the difficulty level increases. The whole process is a series of hits and misses, each one varying the nonce before a miner get his target. The number of attempts that the miner makes per second is called the hash rate or hash power.
- Take a block header
- Change the nonce
- Check if the block header hash is less than the target. If it is, that block is yours.
- If somebody got the block first, repeat the process from Step 1. If you won the block, repeat the process from Step 2 down.
Hash Rate Measuring Units
The hash rate can be expressed in different denominations and is measured per second. The denomination of hash rates uses the International Systems of Unit. Thus, it uses prefixes, such as kilo, mega, giga, tera, peta, exa, and zetta. Below are some of its most common conversions and denominations:
|1000 hashes per second||1 kH/s
|1,000,000 hashes per second||1MH/s
|1,000,000,000 hashes per second||1 GH/s|
|1,000,000,000,000 hashes per second||1 TH/s|
|1,000,0000,000,000,000 hashes per second||1PH/s
|1,000,000,000,000,000,000 hashes per second||1 EH/s
|1000 kH/s||1 MH/s|
|1000 MH/s||1 GH/s|
|1000 GH/s||1 TH/s|
It should be noted that the hash rates of each cryptocurrency are different. That’s because each of them uses a different algorithm, and different algorithms need different amounts of memory and computing power.
For example, the Bitcoin uses the SHA256 algorithm which, by today’s standards, is easy to calculate. Thus, if you want to mine competitively (that is you want to receive a reward), you should use a mining device that produces hashes in the terahash (TH) range and more. Ethereum mining devices, on the other hand, especially the GPU (graphics processing unit), generally run in the megahash (MH) range.
Hash Rate and Profitability
A miner’s profit depends on both hash rate and difficulty. As the difficulty of the network increases, so does everything else the hash rate, the profit, and the electricity consumed.
The difficulty increases with the number of miners in the network. That’s because it will take more time for each miner to compute each block before they can get the right answer. You can see this correlation in the Bitcoin protocol. The Bitcoin community enforced this correlation so that the average block time will always be 10 minutes.
Aside from the factors of hash rate and difficulty, profitability also depends on the electricity consumed by the mining equipment. As mentioned above, the electricity costs increase when the difficulty increases.
For example, a common Bitcoin ASIC nowadays has a mining power of 12 TH/s. Based on the current difficulty, its mining rate will be on average 0.318 BTC per year. That means that if these 12 terahashes are used to mine Bitcoin Cash, the miner should expect to get 2.7635 BCH every year.
Ethereum, on the other hand, can be mined around at 50 MH/s with a decent GPU. Some equipment can produce more; some less. Someone mining the Ethereum at 50 MH/s should expect to earn 1.45 Ethereum every year. Ethereum mining rigs often use 7 GPUs, which would mine a total of around 10 Ether every year at that speed.
What is more important than a mining machine’s hash rate is its efficiency. If one mining machine has a 15 percent higher hash rate than another, but its electricity cost is 50 percent higher, the ROI is not worth it. Thus, miners should also include efficiency in the equation.