Hash Rate, Miner’s Reward And Difficulty

Hash rate, miner’s reward, and difficulty are interdependent on each other in various ways. Whenever Bitcoin network’s difficulty goes up more hash rate is required to mine/find the blocks and as result miners earn the block reward of 12.5 BTC plus the transaction fees.

Interestingly, the Bitcoin network’s difficulty goes up because of more miners joining the network and thus the hash power needs to be increased (i.e. more computational guesses needs to be made per second to find the solution).

This interesting correlation is enforced in the Bitcoin protocol itself so that the average block time remains 10 minutes.

After reading this, some of you would want to mine bitcoins by providing hash power to the Bitcoin network but that is a very costly and energy-intensive affair which everyone cannot do. It requires you to make expensive hardware investments, pay for huge electricity bills, and demands that you have a good amount of computer knowledge.

And until you are ready to become a miner, keep working hard in your current profession, HODL Bitcoin and stay tuned to CoinSutra to keep learning more about the Bitcoin revolution.

This is the Bitcoin’s hash rate distribution.

Bitcoin network’s hash rate now is 50 TH/s and is only growing as the more miners are joining in so more difficulty is going up.

How Is The Hash Rate Measured & its Unit?

Hash rate, as I said, is a unit measured in hashes per second or [h/s] and here are some usual denominations used to refer it.

Hash rate denominations

1 kH/s is 1,000 (one thousand) hashes per second

1 MH/s is 1,000,000 (one million) hashes per second.

1 GH/s is 1,000,000,000 (one billion) hashes per second.

1 TH/s is 1,000,000,000,000 (one trillion) hashes per second.

1 PH/s is 1,000,000,000,000,000 (one quadrillion) hashes per second.

1 EH/s is 1,000,000,000,000,000,000 (one quintillion) hashes per second.

Comman Hash rate Conversions

1 MH/s = 1,000 kH/s

1 GH/s = 1,000 MH/s = 1,000,000 kH/s

1 TH/s = 1,000 GH/s = 1,000,000 MH/s = 1,000,000,000 kH/s

and so forth

Bitcoin Network’s Hash Rate & Distribution As Of Now?

Hash Rate or Hash Power

Hash Rate, also Hash Power, is the measuring unit that measures how much power the Bitcoin network is consuming to be continuously functional. By continuously functional I mean how much hash power is it consuming to generate/find blocks at the normal mean time of 10 minutes.

If you remember, in my previous article What is a Bitcoin hash I explained thoroughly that the Bitcoin network consumes a lot of energy because it has to solve mathematical intensive computations regularly to find the blocks.

These computations for finding the blocks are basically mathematical puzzles that a miner cannot just guess without a lot of computation.

To successfully mine a block, a miner needs to hash the block’s header in such a way that it is less than or equal to the “target.”

The target, at the time of writing this article, is that the SHA-256 hash of a block’s header must be a 256-bit alphanumeric string, and must start with 18 zeros. The target changes as the difficulty change every 2016 blocks.

And the miners arrive at this particular hash (or target) by varying a small portion of the block’s headers, which is called a “nonce.” A nonce always starts with “0” and is incremented every time for obtaining the required hash (or target).

Since the varying of the nonce is hit and miss, the chances of getting this particular hash (or target), which starts with these many zeros, is very low. Therefore, many attempts must be made by a miner by varying the nonce.

And this number of attempts made per second is called hash rate or hash power. And this hash power or guessing attempts are made by miners who mine the Bitcoin blocks by a process called Bitcoin mining.

To understand more about hash power see this short video on hash power or hash rate which perfectly explains it.

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What is crypto currency?

A crypto currency is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets. Crypto currencies are a kind of alternative currency and digital currency (of which virtual currency is a subset). Crypto currencies use decentralized control as opposed to centralized digital currency and central banking systems.
The decentralized control of each crypto currency works through distributed ledger technology, typically a block chain that serves as a public financial transaction database.

Blockchain

The validity of each cryptocurrency's coins is provided by a blockchain. A blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block typically contains a hash pointer

as a link to a previous block, a timestamp and transaction data. By design, blockchains are inherently resistant to modification of the data. It is "an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way".For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which requires collusion of the network majority.

Blockchains are secure by design and are an example of a distributed computing system with high Byzantine fault tolerance. Decentralized consensus has therefore been achieved with a blockchain. Blockchains solve the double-spending problem without the need of a trusted authority or central server, assuming no 51% attack (that has worked against several crypto currencies).

Mining

In crypto currency networks, mining is a validation of transactions. For this effort, successful miners obtain new crypto currency as a reward. The reward decreases transaction fees by creating a complementary incentive to contribute to the processing power of the network. The rate of generating hashes, which validate any transaction, has been increased by the use of specialized machines such as FPGAs and ASICs running complex hashing algorithms like SHA-256 and Scrypt. This arms race for cheaper-yet-efficient machines has been on since the day the first crypto currency, bit coin, was introduced in 2009.With more people venturing into the world of virtual currency, generating hashes for this validation has become far more complex over the years, with miners having to invest large sums of money on employing multiple high performance ASICs. Thus the value of the currency obtained for finding a hash often does not justify the amount of money spent on setting up the machines, the cooling facilities to overcome the enormous amount of heat they produce, and the electricity required to run them.

Some miners pool resources, sharing their processing power over a network to split the reward equally, according to the amount of work they contributed to the probability of finding a block. A "share" is awarded to members of the mining pool who present a valid partial proof-of-work.

As of February 2018, the Chinese Government halted trading of virtual currency, banned initial coin offerings and shut down mining. Some Chinese miners have since relocated to Canada. One company is operating data centers for mining operations at Canadian oil and gas field sites, due to low gas prices. In June 2018, Hydro Quebec proposed to the provincial government to allocate 500 MW to crypto companies for mining. According to a February 2018 report from Fortune, Iceland has become a haven for crypto currency miners in part because of its cheap

electricity. Prices are contained because nearly all of the country's energy comes from renewable sources, prompting more mining companies to consider opening operations in Iceland. The region's energy company says bit coin mining is becoming so popular that the country will likely use more electricity to mine coins than power homes in 2018. In October 2018 Russia was to become home to one of the largest legal mining operations in the world, located in Siberia.

In March 2018, a town in Upstate New York put an 18-month moratorium on all crypto currency mining in an effort to preserve natural resources and the "character and direction" of the city.

Wallets

A crypto currency wallet stores the public and private "keys" or "addresses" which can be used to receive or spend the crypto currency. With the private key, it is possible to write in the public ledger, effectively spending the associated crypto currency. With the public key, it is possible for others to send currency to the wallet.

Bitcoin ATM

A Bit coin ATM is a kiosk that allows a person to exchange Bit coin and cash. Some Bit coin ATMs offer bi-directional functionality enabling both the purchase of Bit coin as well as the sale of Bit coin for cash. In some cases, Bit coin ATM providers require users to have an existing account to transact on the machine. Bit coin machines are not ATMs in the traditional sense and probably use the wording ATM as a neologism. Bit coin kiosks are machines which are connected to the Internet, allowing the insertion of cash in exchange for bit coins given as a paper receipt or by moving money to a public key on the block chain. They look like traditional ATMs, but Bit coin kiosks do not connect to a bank account and instead connect the user directly to a Bit coin exchange. According to an advisory issued by the Consumer Financial Protection Bureau, "they may also charge high transaction fees – media reports describe transaction fees as high as 7% and exchange rates $50 over rates you could get elsewhere".