Hash Rate
Overview
The Hash Rate is a measure of the aggregate computing power provided by miners in a proof of work blockchain. In the case of Bitcoin, the hash rate is the total power allocated to solving the cryptographic problem SHA-256 through which consensus is reached between all nodes, publicly validating transactions in the blockchain.
A blockchain ’s hash rate is often associated with its security. This is the case as more computing power allocated to validate transactions make it more expensive to attempt to attack the blockchain. Therefore, increases in hash rate can be interpreted as improvements in the underlying blockchain security.
💡 How can I use it?
By securing the network, the hash rate is a prevalent indicator of the blockchain’s health. Large decreases in the hash rate are important to note as they make the underlying network more vulnerable to 51% attacks. This is the case as less computing power would be required to attack the network, thus making it less costly. On the other hand, increases in hash rate make it more costly to attack a blockchain.
Another important factor of the hash rate is how it relates to miner profitability. When mining rewards drop in Bitcoin’s well-known halvings, miner profitability also drops proportionally. As a result, the hash rate often drops right after halvings, though this has typically been temporary.
Willingness to keep mining despite smaller profit margins can be interpreted as a sign of optimism among miners. Hence, Bitcoin’s increasing hash rate despite the May 2020 halving could signal positive expectations from miners in regards to the crypto-asset’s price, which can potentially be interpreted as bullish sentiment from miners.
👇🏼 Even more - Articles Using This Indicator
Last updated
