What does Bitcoin hashrate mean?
In order to understand the hash rate and its functions, you first need a basic understanding of Bitcoin mining. Bitcoin mining is a computerised process with three main functions:
- Issue new Bitcoins
- Confirm transactions
- Ensure the Bitcoin network remains secure
Where fiat currencies are issued by central banks, new Bitcoins are issued to miners via a block reward for solving a block. They do this by using special hardware to solve a complex computational problem, which produces a hash – a seemingly-random 64 character output.
In order to find the hash number, Bitcoin miners use the SHA-256 Cryptographic Hash Algorithm. The data that a miner inputs into the SHA-256 hash function include all the current transactions which fit into the blocks size limit, the previous blocks hash result, and the nonce. The nonce is a random value the miner changes with each hash attempt to get a new output. Even a tiny change in input produces a completely different output. Bitcoin miners are looking for an output with a certain number of zeroes. Today, Bitcoin miners have to find a hash which starts with nineteen zeroes. To get this number requires many, many attempts. Once the hash is found, the block is closed and it is added to the blockchain. After successfully mining a block, miners are rewarded with newly-created Bitcoins and transaction fees. The hash rate, therefore, is the speed at which a miner arrives at a hash – the number of times a hash function is computed per second. As more miners mine Bitcoin, this causes a surge in the hash rate.