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BT-Education: What is hashrate? What is hash price?

Hashrate is one of the most commonly referenced metrics in bitcoin mining. But what is it?

As the term suggests, the Bitcoin network’s hashrate is simply the estimated rate of total hashes generated by all active mining machines. Called hashing, the process of generating hashes is the primary job of miners.

What’s a hash?

Hashes are strings of numbers and letters used to encrypt data.

Any sort of raw information—like passwords, poems, or single letters—can be turned into a hash by using specific hashing algorithms. The Bitcoin protocol uses the SHA-256 hashing algorithm.

All hashes are unique, like fingerprints. No two pieces of data generate the same hash. And there is no way to “unlock” a hash to know what data it contains. Only by re-entering the exact same information into the hashing algorithm and generating an identical replicated hash can the data behind the first hash be verified.

What is hash price?

Hashprice (or "hash price") is the market value assigned per unit of hashing power. Hashprice is measured by dollars per terahash per second per day ($/TH/s/d).

The more hashing power that is directed toward Bitcoin or any other Proof-of-Work blockchain, the cheaper the value of an individual miner’s hashing power becomes. But when hashrate drops, meaning total hashing power is declining, the value per unit of hashing power increases.

Hashprice is not a measure of per-block revenue collected by miners from mining subsidies and network fees. Instead it serves as a more refined measurement for the daily revenue compute power hashing for a given network.

Fluctuations in the value of hashrate are triggered by:
  • Changes in mining difficulty;
  • And changes in bitcoin’s price.
Hashprice has is negatively correlated to hashrate, which is seen when mining difficulty adjusts. Bitcoin’s mining difficulty increases or decreases according to similar growth or reduction in the network’s hashrate. Difficulty reduction comes from less total hashing power, which causes an increase in hashprice. Similarly, difficulty increases from growth in total hashrate equates to a reduction in hashprice.

Hashprice is positively correlated to bitcoin’s price movements. Between difficulty adjustments, hashprice moves with bitcoin’s price. When the price climbs or drops, the dollar-denominated revenue per terahash follows.

Measuring hashrate

Hashrate (sometimes called hash power) is an estimate of the total amount of computational activity that bitcoin miners spend working to add new blocks to the network. This task requires miners to encrypt data into hashes and match it with a piece of encrypted data in the new block, called a nonce. Finding an encrypted match solves the block.

Hashrate is measured using the base unit of hashes per second (h/s).

The metric itself is extrapolated from the speed at which new blocks are added to the blockchain, which can lead to variance in the hashrate number reported by different data providers.
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