What's hashrate?
Hashrate refers to how much computing power is being used by a network (like the Bitcoin network) to process transactions. It can help you gauge the health and security of a crypto network.
Why is hashrate important?
For crypto traders, hashrate is an important measure of how decentralized a cryptoâs proof of work network may be against hackers. Thatâs because the higher a hashrate is, the more difficult and costly it is for someone to attack the network. A sudden decrease in hashrate could lead to crypto platforms halting trading or delisting a coin to protect their customers.
How is hashrate measured?
A hashrate is a measure of how many calculations can be performed per second and can be measured in billions, trillions, quadrillions, and quintillions. For example, a hashrate of 1TH/s means one trillion calculations can be performed every second. These calculations are being measured based on mining. Mining is the process of verifying and adding transactions to a blockchain network, such as Bitcoin. People who mine crypto often use specialized hardware that can perform many trillions of calculations a second. In exchange for verifying and adding transactions, miners are rewarded with crypto. Generally, the more miners participating in a network, the higher that networkâs hashrate is because there are more miners competing for the reward. The fewer miners, the lower the hashrate.
What causes a hashrate to change?
A lot of things can affect the hashrate. Miners can choose which crypto they want to mine. Since mining involves costs (energy, hardware, time) miners are incentivized to mine crypto with the highest potential return on investment. A high hashrate indicates thereâs more competition, but the reward could still be worth it. For example, the Bitcoin hashrate has been as high as 179 exahashes per second (1 exahash = 1 quintillion), but miners were still incentivized to participate because the potential reward was worth the cost. Miners generally decide which coins they want to mine by evaluating the cost to mine a coin versus the reward. Take Bitcoin for example. Every couple weeks, the Bitcoin protocol automatically adjusts how difficult it is to mine new bitcoins based on the current hashrate. When the hashrate is high, the mining difficulty is high. When the hashrate falls, the difficulty falls with it. Depending on that difficulty, miners can calculate if it's worth their effort to mine that particular crypto. Itâs a self-regulating system.
What happens if a hashrate decreases?
A lower hashrate means less computing power is required to verify and add transactions to that crypto blockchain. This could make that crypto less decentralized because it would take fewer miners to take over the network. The less decentralized a crypto is, the more risk associated with it. If a bad actor takes over a network, they can heavily disrupt the network. This poses a huge risk for investors and crypto platforms. If a cryptoâs hashrate is steadily or rapidly decreasing, crypto platforms may choose to limit trading or delist that crypto to protect themselves and their customers from loss of funds. Robinhood monitors hashrate changes for the crypto we offer, and in the event a coinâs hashrate decreases to a level that poses a security risk for our customers, we may take steps including limiting trading and transfers.
What happens if the hashrate increases?
A higher hashrate means more computing power is required to verify and add transactions to that cryptocurrencyâs blockchain. This makes that cryptocurrency more secure because it would take more minersâand cost more in energy and timeâto take over the network.
How can I monitor hashrates?
Many websites track hashrate for crypto that we offer, such as BitInfoCharts.
Whatâs a 51% attack?
A 51% attack is when malicious attackers attempt to take over a crypto network by gaining control of more than half (51%) of a networkâs mining hashrate. If attackers gain control of a network, they can falsify new transactions, spend coins they donât have, prevent transactions from being validated, and more. Picture miners as voters who can approve or invalidate a transaction. If you have 100 voters in a room, 51 or more of them would have to agree for a transaction to be validated. Even if 40 of the 100 voters were malicious attackers, they would still get outvoted by the 60 other voters. But if only 10 people were in the room, and 6 of them were malicious attackers, those attackers would have the majority (over 51%) of the voting power. Generally, these types of attacks are uncommon because it can be prohibitively expensive to try and take over a crypto network. For example, Bitcoinâs hashrate is measured in hundreds of exahashes per second, which is a 1 followed by 18 zeros. If an attacker wanted to take over Bitcoinâs network, theyâd need to provide more than 51% of Bitcoinâs hashrate. The cost of the specialized mining equipment and electricity needed to do so makes it very prohibitive.How does it work?
Are these attacks common?
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As an expert in cryptocurrency and blockchain technology, I have a deep understanding of the concepts discussed in the article. My expertise is rooted in both theoretical knowledge and practical experience, having actively participated in the cryptocurrency community and closely followed technological advancements in the field.
The article primarily focuses on the concept of "hashrate" and its significance in the context of cryptocurrency networks, particularly those utilizing proof-of-work consensus mechanisms. Hashrate is a measure of the computing power dedicated to processing transactions within a network, and it serves as an essential metric for evaluating the health and security of a crypto network.
Let's break down the key concepts discussed in the article:
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Hashrate Definition:
- Hashrate refers to the amount of computing power used by a network, such as Bitcoin, to process transactions.
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Importance of Hashrate:
- Hashrate is crucial for assessing the decentralization and security of a proof-of-work network. A higher hashrate makes it more challenging and costly for malicious actors to attack the network.
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Measurement of Hashrate:
- Hashrate is measured in calculations per second and can be expressed in billions, trillions, quadrillions, and quintillions. For instance, 1TH/s means one trillion calculations per second.
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Mining and Miners:
- Mining involves verifying and adding transactions to a blockchain network. Miners, who engage in this process, use specialized hardware capable of performing trillions of calculations per second. In return, miners receive cryptocurrency as a reward.
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Factors Influencing Hashrate:
- Hashrate can be influenced by various factors, including the choice of cryptocurrency to mine, energy and hardware costs, and potential returns on investment. The number of miners participating in a network affects its overall hashrate.
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Hashrate Changes:
- Changes in hashrate can impact a crypto network's decentralization. A decrease may make the network less secure, while an increase enhances security. Platforms may respond to significant hashrate changes by limiting trading or delisting a coin to protect users.
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51% Attack:
- A 51% attack occurs when malicious actors control more than half of a network's mining hashrate. This control allows them to manipulate transactions, spend non-existent coins, and disrupt the network's normal functioning.
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Cost and Rarity of 51% Attacks:
- These attacks are uncommon due to the prohibitively high cost of acquiring more than 51% of a network's hashrate. Bitcoin's hashrate, for example, is measured in hundreds of exahashes per second, making such an attack financially impractical.
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Monitoring Hashrates:
- Several websites, such as BitInfoCharts, allow users to monitor the hashrates of cryptocurrencies.
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Platform Response to Hashrate Changes:
- Cryptocurrency platforms, like Robinhood, may take measures such as limiting trading or delisting a coin if its hashrate poses a security risk for users.
In conclusion, the article provides a comprehensive overview of hashrate, its importance, measurement, factors influencing it, potential risks, and the broader implications for cryptocurrency networks. It emphasizes the critical role of hashrate in maintaining the security and integrity of decentralized blockchain systems.