There is a lot of confusion when it comes to cryptocurrency and Bitcoin. Both fields are relatively new, and although they are gaining more and more prominence, it still seems as if many people are trying to develop a better understanding of the various technical aspects of the financial market. Indeed, in order to responsibly invest in Bitcoin, individuals should have a good understanding of a variety of metrics. One example is hash rates, let’s go over what it is. In this article the Bitcoin Hash Rates are Explained.
What is a hashrate?
A Hashrate is connected to the mining process of Bitcoin. For newcomers, this can get confusing. Mining is the process by which cryptocurrency transactions are created and processed. Bitcoin or crypto “miners” are people who do the work to process crypto transactions. They are given Bitcoins as a reward for their hard work. New blocks – or groups of transactions – are created on an average of every ten minutes. According to the Bitcoin experts at SoFi Invest, a hashrate is, “the amount of computing power being contributed to the network at any given time. The more mining going on, the higher the hash rate.”
As such, a higher hashrate is good. It means that there is more computing power going towards the overall creation of bitcoin and more transactions occurring. This shows that specific crypto is in high demand and has robust computing power behind it.
Why is it important?
You want a higher hashrate for many reasons. First, this means that there is more overall computing power behind a currency, and this leads to faster and more secure transactions. Second, it shows that there is an increased interest in a particular coin. This benefits the cryptos holders and helps to push the value upwards. Third, a higher hashrate means that more computing power is behind each transaction. This can boost the speed of transactions for all parties involved. Hashrates for many currencies are very powerful these days, and for some of the more popular currencies, they can reach astonishing rates – as high as quintillions of hashes every second.
How is it calculated?
A hashrate is calculated via a complex series of computer computations. It is computed in the number of hashes per second (h/s), so it’s essentially a unit of time. These numbers can fluctuate significantly on the day based on a variety of factors, but it is chiefly tied to the number of transactions that occur within a specific crypto. Depending on the size of a network and its overall speed, the unit of measurement may fluctuate, ranging from kilo hashes to zetta hashes.
Seems complicated? It can be. Remember: A higher hashrate is better. Make sure to keep an eye on that, and you’ll be good to go. Of course, a hashrate is not the only factor that you should use in order to determine if you need to invest in a particular crypto, but it is one of the more important ones.