Hashrate 101

Hashrate refers to the computational power used to to perform hashing computations (i.e., complicated calculations) when validating and processing cryptocurrency transactions. For the Bitcoin network, these computations are performed to find a solution for the complex cryptographic puzzles that underpin the blockchain. 

Hashrate is usually represented as Exahashes per second (EH/s). Currently, the Bitcoin network's total hashrate is approximately 630 EH/s¹, with an estimated market value of around $55 billion².

The role of hashrate in mining

1. Secureness and strength indicator of the Bitcoin network: The hashrate reflects the overall computing power being used to process and validate transactions on the Bitcoin blockchain. The more computing power directed towards the network, the more secure and resilient it becomes against potential attacks or disruptions. A higher hashrate indicates that more miners are contributing computational power to the network. This increases the cost and difficulty for a single entity to launch an attack and gain control of the network. Conversely, a lower hashrate can make the Bitcoin network more vulnerable, as it would reduce the cost required for an entity to disrupt the network

2. Performance indicator for specialized mining machines: Hashrate is measured by the number of calculations (also known as "hash") each mining computer can perform per second, serving as a performance indicator for specialized mining machines. A higher hashrate corresponds to a quicker likelihood of successfully solving the puzzles, which increases the miners' chances of being rewarded. The blockchain adjusts the difficulty of these puzzles to maintain an average block creation time of about ten minutes. This balance between hashrate and difficulty is crucial for ensuring a competitive and secure mining environment

3. Market conditions indicator: Hashrate typically fluctuates with market conditions. During bullish phases, when Bitcoin prices rise, more miners are incentivized to join the network, leading to an increase in hashrate. Conversely, in bear markets, when production costs surpass Bitcoin prices, hashrate often declines.

Strategies for increasing hashrate

Miners can boost their hashrate by acquiring additional mining rigs or achieve higher success rate by combining hashrate through participating in mining pools. Joining a pool allows miners to combine their computational power, improving their chances of successfully solving blocks and earning rewards. This collaborative approach enhances efficiency and reduces the risks associated with solo mining.

_{1 Mempool.space; Hashrate (moving average) as of 30 Sep 2024}

_{2 Bloomberg and respective official websites; Using the average (excluding highest and lowest) EV/current deployed hashrate multiple of ~75x, EV as of 30 Sep 2024 of listed bitcoin mining companies (including MARA, CLSK, RIOT, CORZ, HUT, CIFR, IREN, WULF, BTDR, BITF, HIVE, BTBT, SDIG, GREE, MIGI) and current deployed hashrate as of 30 Jun 2024}