What is Bitcoin network hashrate (Bitcoin hashrate)?

What is Bitcoin network hashrate? What is Bitcoin network hashrate actually mean?

Bitcoin mining is a technology that converts complex computational resources into a specific amount of new digital currency. In order to obtain rewards and improve transaction speed and reduce costs, the blockchain needs to encrypt the data and store it on a secure network; at the same time, each chain must have sufficient hashing power to support block production. To achieve this goal, it requires a significant amount of energy consumption (such as Ethereum).

Currently, there are two methods to make Bitcoin mining more efficient: firstly, use dedicated integrated circuit (ASIC) chips or GPUs to build a complete system. Then connect other computer hardware (such as CPUs) directly with the Bitcoin software through hard drives, which generates more Bitcoins. The other way is to use ASIC manufacturing devices. This is a scalability-based algorithm designed to allow each Bitcoin node to perform any computation task, including verifying transactions, which typically relies on “random number” operations.

According to the definition, “randomness” (proof-of-randomization, PoW), that is, this process becomes simpler over time. When you turn a set of inputs and outputs into two lines of code, this happens: “relative to the current computer”, you can change the format of the message by processing a certain instruction.

For example, if your programmer wants to check if a piece of code has been sent to their machine, but they haven’t considered the Proof-of-Stake (PoS) consensus mechanism they are running, because it involves some very energy-consuming and expensive tasks. Therefore, if you want to participate in certain tasks, you need to pay a certain proportion of gas fees, or the so-called “total difficulty”.

Bitcoin mining can mainly be divided into two types, one is used to mine coins, such as mining a BTC block, and the other is used to mine other tokens, as well as some special applications, such as balances in exchange wallets, and so on. The Bitcoin miners use specially designed solutions that utilize the most powerful artificial intelligence tool in the Bitcoin network – Hashgraph to generate and record transaction information. This analysis tool allows miners to choose where to start from and eventually decide which mining pools should join.

Since many miners rely on their own controlled data to ensure the normal operation of their business, Bitcoin miners usually use custodians that do not need to be audited by third-party institutions as intermediaries to provide funds. In addition, there are some Bitcoin miners who do not want to own their own servers or just buy Bitcoin, but choose to pay higher prices to miners to get more income. “We have seen many mining companies invest a lot of money in maintaining infrastructure and are likely to be the biggest beneficiaries.”

So what drives the increase in the entire network’s hash rate?

Next, let’s introduce why new incentives are introduced.

Bitcoin Hashrate

According to Glassnode’s data, the current Bitcoin hash rate is 115.8EH/s. If calculated based on this data, there are more than 200,000 blocks being generated with new transactions every 10 minutes.

In the past few months, with more and more miners joining the mining industry, this number has more than doubled. This makes the increase in hash rate and market demand more urgent.

The recent price performance of Bitcoin reflects this. Since the beginning of 2020, the price of BTC has been rising and reached an all-time high in January 2021. Technically, when the price goes up, it means that more mining machines are mining Bitcoin. However, due to the impact of the COVID-19 pandemic, the price of Bitcoin may undergo a significant decline (as demand for Bitcoin decreases), thereby affecting the overall trend of the cryptocurrency market. Nevertheless, compared with the first quarter of 2019, Bitcoin’s volatility this quarter is still low.

However, in the next year, as the global economic recovery continues and the deflationary cycle remains unchanged, investors will shift their focus to other currencies, including Ethereum, Dogecoin, and other mainstream coins. At the same time, DeFi tokens are also rapidly rising. According to DappRadar data, the number of daily active users of decentralized exchanges has increased by about 50% so far this year. (Coindesk)