Bitcoin Hashrate Explained

BTC hashrate explained

Despite the fact that Bitcoin mining has existed for more than 10 years, new and new people join the miners community. If you want to join them, you need to master the basics of mining technology that will allow you to choose the necessary equipment and evaluate its productivity. One of the most crucial aspects is Bitcoin hash, and today we will discuss this phenomenon and its connection with other indicators.

Mining Hashrate Meaning

Bitcoin net hashrate (or hashing frequency) is a parameter that characterizes the speed of solving mathematical problems by devices that are involved in the production of new blocks in networks running on the Proof-of-Work algorithm (PoW). In other words, it is a measure of the performance of the equipment that is used for mining. When it comes to Bitcoin hashrate, we mean the total computing power of all mining devices connected to the Bitcoin network.

How Is Hashrate Measured?

Since the mathematical problems that need to be solved to generate new blocks are called hashes, hash rate is measured in hashes per second (H / s). The computing power of the Bitcoin network has been growing rapidly in the last 10 years since the advent of cryptocurrency, and the productivity of equipment has also been constantly increasing. Therefore, today, the crypto community uses other units of measurement to express hash rate, for example, Terahash / s (1 TH / s = 1 000 000 000 000 H / s) and Petahash / s (1 PH / s = 1000 TH / s). Currently, the Bitcoin hash is measured in Exahashes (1 EH / s = 1000 PH / s).

BTC Hashrate History

In the first year of Bitcoin’s existence, network power was extremely scarce compared to today’s figures. At that time, the Bitcoin hashrate was measured in Megahashes / s (MH / s), i.e. in millions of hashes.

Initially, this indicator was supported by the equipment of developers and a handful of enthusiasts close to them. Because of this, in the first month of 2009, the Bitcoin hash was very unstable (4.5-10 MH / s). Then, until June, the network capacity became more stable and basically equaled 5–6, occasionally going beyond that.

In June, the hashrate dropped sharply and remained in the range of 1–4.5 MH / s for six months. In December, against the background of the launch of the first Bitcoin trading platform New Liberty Standard and the expansion of the circle of people aware of the first cryptocurrency, there was finally a sharp jump to 10 MH / s, which marked the beginning of a steadily rapid increase in the computing power of the network.

BTC hashrate - early stage.jpeg

The next year and a half, an exponential increase in the hashrate was observed: it was provoked by the popularization of Bitcoin and mentions in some online media. Also, BTC became popular thanks to the launch of MtGox in July 2010: it became the first full-fledged crypto-exchange.

The capacity increase was inhibited near the level of 10 TH / s only after hacking of the exchange in June 2011. After a month and a half, hackers attacked the MyBitcoin wallet, after which the Bitcoin exchange rate went down to December, during which the hash rate decreased to 7 TH / s.

Throughout 2012, the network capacity was gradually growing (in proportion to the movement of the BTC rate) and by the time of the first Bitcoin halving (November 28) reaches 29 TH / s. The halving of the award frightened off some of the miners, triggering a drop in the hash rate to 18 TH / s in just 2 weeks.

BTC hashrate - 2013-2015.jpeg

During the first half of 2013, network capacities increase 10-fold and reach 200 TH / s (during this time, Bitcoin rises from $ 14 to $ 266). Then, for the time remaining until the end of the year, the hashrate grows even faster and reaches 17 PH / s (at this point, Bitcoin is trading at $ 1240).

Throughout 2014, despite the bearish trend in the market provoked by a new hacking and closing of the MtGox exchange, the computing power of the Bitcoin network is gradually growing to the level of 300 PH / s.

In January 2015, the Bitstamp cryptocurrency exchange announced the loss of 19,000 BTC due to a hacker attack. This event sets the tone for the whole year – the Bitcoin exchange rate is consolidating in the $200-300 range, and the hash rate is slowly going to around 400 PH / s.

At the end of October, the EU High Court exempts Bitcoin holders from taxes on the sale of cryptocurrencies, which provokes a spurt in the value of BTC up to $ 500. This gives rise to a new wave of popularization of Bitcoin and, as a result, accelerates the growth of network capacities to 770 PH / s by the end of the year.

BTC hashrate - 2016-2017.jpeg

At the end of January 2016, the hashrate reaches 1 EH / s (1000 PH / s) for the first time. Bitcoin has doubled in price this year (from $ 500 to $ 1,000). The same thing happens with computing power – by December, they will double and the mark of 2 EH / s will be overcome. It is interesting that the miners did not pay attention to what happened in mid-2016 and continued to increase the productivity of their equipment.

In the first half of 2017, there has been an acceleration in the growth of the hashrate. By August, it reaches 7 EH / s and then drops to 4.3 EH / s due to the transfer of some of the miners to the extraction of Bitcoin Cash – a coin that appeared as a result of the Bitcoin hard fork.

Over the next three months, network capacities almost triple (11.5 EH / s). At this point, the Bitcoin exchange rate reaches $ 8,000 amid extensive media coverage and the expected SegWit2x hard fork, after which there is a short-term price correction to $ 5800 and a decrease in the hash rate to 4.9 EH / s. By the end of the year, the Bitcoin exchange rate continues to grow rapidly to $ 20,000, attracting more and more attention from miners who manage to increase their computing power to 15 EH / s in just a month.

2018 begins with negative news about the closure of crypto exchanges in South Korea, accompanying the start of a downtrend, from which the market, as a result, can not get out for more than a year. Despite this, the Bitcoin hash rate continues to grow non-stop until October, reaching 58-60 EH / s. This is explained by the fact that mining remains profitable as long as Bitcoin is trading above $ 6,000.

The situation changes on November 14, when the Bitcoin exchange rate drops sharply below this level and continues to fall until mid-December, stopping at around $ 3,100. At this point, a significant part of the miners that could not stand the pressure of the bears are disconnected from the network, and the computing power of the network is reduced to 35 EH / s.

During the first four months of 2019, while the bitcoin exchange rate consolidated at $ 4000, and then unexpectedly rose to $ 5000-5600, the hashrate grew a bit and stayed in the range of 40-50 EH / s.

In mid-May, the cost of BTC finally again turned out to be above $ 6,000, and then completely reached $ 8,000, returning faith in the “native”. Miners began to actively return their equipment to the network and the total computing power for the first time returned to the maximum value of last year – 58 EH / s.

At the time of this writing, Bitcoin is hanging around the $ 9,500 mark, and the hash rate has risen to 65 EH / s. Given the statistics of past years, the growth of computing power should continue. The difference can only be at its pace, which will depend on further movements of the Bitcoin exchange rate.

Bitcoin hashrate & mining difficulty: what’s the connection? 

Also, we should not forget that Bitcoin hashrate difficulty is another crucial indicator. It also keeps growing when the number of miners is increasing:

BTC hashrate difficulty.jpeg

As we can see on the graph, all-time hashrate for Bitcoin has recently reached its higher high. Until the end of 2017, the world didn’t know about cryptocurrency much (at least, this phenomenon was widespread in the USA only). But after that, the number of miners has increased exponentially.

All-time Bitcoin hashrate.jpg

BTC mining hashrate difficulty is a dynamic characteristic that is inextricably linked with a hashrate. The thing is that fluctuations in the total network power lead to a change in the residence time of new blocks, which ideally should be 10 minutes. 

In order to prevent a significant acceleration or deceleration in the rate of Bitcoin emission, with every 2016 blocks mined (approximately in every two weeks), the system adjusts the complexity value in the right direction. If you look at the graph of this indicator, for example, over the past year and a half, you will notice that it completely repeats the hash rate changes.

Thus, the Bitcoin network is self-regulating: it maintains between the number of capacities connected to it, the complexity of computing operations and the profitability of mining.

Thus, the Bitcoin hash rate is mainly affected by:

  • The number and performance of network-connected equipment;
  • BTC course;
  • Electricity tariffs (like the previous factor, affect the profitability of devices used for mining);
  • Bitcoin popularity level (varies depending on the direction of the price trend);
  • Market entry for more technologically advanced equipment.

Bitcoin Hashrate Distribution (overall & by country)

Since the vast majority of Bitcoin mining is done via mining pools, the hashrate distribution is the following:

BTC hashrate by pools.jpg

The Chinese mining pools get the lion’s share in BTC mining hashrate. At the same time, when it comes to the number of Bitcoin nodes, most of them are situated in the USA, France, and Germany.

Bitcoin nodes.jpg

BTC Hashrate & Price Correlation

The analysts from DataLight explained that, according to one theory, the complexity and hashrate of cryptocurrencies are rising after its price, as more and more miners start mining digital money. According to another hypothesis that trader Max Kaiser has held since he bought Bitcoin for $3, the opposite is true. The third assumption is that there is a certain formula that can be developed by studying the history of changes in the complexity and value of the coin.

Cryptocurrencies Hashrate List 

Let’s see what the current hash rate for different cryptocurrencies is:

Bitcoin89, 840, 146 TH/s
Ethereum183, 258, 2215 GH/s
Litecoin180, 529, 8 TH/s
Monero317,0829 MH/s
ZCash4,7133 GH/s
Dash5.1432 PH/s
Bitcoin Cash4.457 PH/s

Bottom Line

Through the time of Bitcoin’s existence, BTC hashrate distribution has been different: it depended on a myriad of factors including the number of miners, equipment used, external factors, and, undoubtedly, Bitcoin price. Now you know what the Bitcoin hashrate definition: don’t forget to use it for mining and trading purposes like a pro!