A mere two months from the dips that preceded May’s halving event, the Bitcoin hash rate is back at its peak. What is a hash rate, why does it fluctuate, and what does the recent spike mean for you?
What is the hash rate?
Hash rate is a measure of the combined computing power, at any given time, that everyone around the world is spending on mining Bitcoin. This computing power is what miners dedicate towards earning Bitcoin, and in doing so they secure the network for everyone while recording all Bitcoin transactions.
The higher the hash rate of any individual machine mining Bitcoin, the more Bitcoin that machine has a chance of mining. The higher the hash rate of the entire network, the more computer processing power there is in total, and the more difficult it is to mine Bitcoin. Note, the actual amount of Bitcoin that is mined is permanently hard-wired by the Bitcoin algorithm, so the hash rate doesn’t impact the total amount of Bitcoin produced.
The Bitcoin algorithm adjusts the “difficulty” of mining Bitcoin based on the network hash rate so that no matter how many computers are currently mining Bitcoin, it always remains a challenge to mine, this keeps the network secure for everyone.
Computer hardware used to mine new Bitcoins, securing the network in the process.
What does this mean for you?
A high hash rate is a very good indicator for Bitcoin. It indicates that the network is secure and that miners place a high enough value in the future value of Bitcoin to justify investing new computing power in their operation. Historically, spikes in hash rates have often been followed by spikes in the price of Bitcoin.
There are other factors to take into account, however, reduced energy costs and the creation of faster computer hardware can also lead to a higher hash rate. “I suspect that the rise in the hash rate we are seeing now is caused in part by miners finding cheaper energy costs during this global crisis and restructuring, combined with the price stabilizing and more efficient hardware being deployed” engineer, Max Sklar, told Cointelegraph recently. The fact that this rise is continuing unabated is a good sign for the currency and could suggest more factors are involved.
Put simply, while a range of factors impact on hash rate, a high hash rate guarantees one thing, the network is more secure than ever.