Hash Rate - A hash is the output of a hash function and, as it relates to Bitcoin, the Hash Rate is the speed at which a compute is completing an operation in the Bitcoin code. A higher hash rate is better when mining as it increases your opportunity of finding the next block and receiving the reward.
If you are planning to get involved in crypto mining soon, it’s crucial to know what a hash rate is and its significance. You also need to understand its effect on your capacity to mine the coins. Having good knowledge in hash rate can help you make the best decisions when you are in the mining business or doing it as a hobby. This article will discuss what hash rate, its importance, and the impact of electricity costs on your profitability.
In simple terms, a hash rate can be defined as the speed at which a given mining machine operates. Crypto mining involves finding blocks through complex computations. The blocks are like mathematical puzzles. The mining machine has to make thousands or even millions of guesses per second to find the right answers to solve the block.
In other words, to effectively mine a block, the miner should hash the block’s header such that it’s below or equal to the “target.” The target changes with every change in difficulty. To arrive at a given hash (or target), the miner has to vary some of the block’s headers, which is known as a “nonce”.
Each nonce begins with “0” and is increased every time to get the necessary hash (or target).
Given that the varying of the nonce is a game of chances, the chances of getting a given hash (or target) is very low. The miner, therefore, has to make numerous tries by varying the nonce. The number of attempts that miner makes per second is known as the hash rate or hash power.
Hash rate is computed in hashes per second (h/s). Some of the common terms used include mega, giga, and tera depending on the number of hashes. For instance, a machine with a speed of 60 hashes per second will make 60 guesses per second when trying to solve a block. Kilohash (KH/s) is used for 1,000 hashes, megahash (MH/s) for 1,000 kilohashes, terahash (TH/s) for 1,000 megahashes, and petahash (PH/s) for 1,000 terahashes.
The various machines used to mine different cryptocurrencies don’t have equal hashes. For instance, a mining machine for bitcoin has a different hash rate from that of ethereum. This can be defined by the different algorithms used by the cryptocurrencies as they don’t use the same amount of memory and computing to be mined.
The hash rate, miner’s profits, and difficulty depend on each other in several ways. Let’s take bitcoin for instance. Any time Bitcoin network’s difficulty increases, the hash rate increases and consequently, the miner earns 12.5 BTC and the transaction fees. The number of miners in the Bitcoin network increases the difficulty, as a miner needs to compute more guesses per second.
For profitability, let’s consider bitcoin. Currently, a bitcoin mining device such as ASIC has a mining power of approximately 12 terahashes per second. After considering today’s difficulty, the machine can produce 0.318 BTC per year.
However, when calculating profitability, you need to consider electricity costs linked with the mining equipment. This is called the efficiency of the miner. An increase in the difficulty of mining a cryptocurrency increases the electricity cost. For instance, a mining machine with a 10 percent higher hash rate than another, but has 50 percent higher electricity costs is both wasteful and less profitable. Therefore, although the hash rate is an important factor to consider when mining, always remember to consider the efficiency.