The success of cryptomoney has attracted a lot of people. In particular, the activity of mining cryptomoney such as Bitcoin is booming. Indeed, this activity is showing historic levels of profitability. Are you interested in Bitcoin mining or in cryptos in general? Then you have probably already heard about hashrate? What is hashrate? Why is hashrate important for mining? We explain everything about hashrate in this guide.
The basics of cryptomoney mining
In order to understand hashrate, one must first know a few notions about crypt mining. Hashrate is mainly involved in blockchains that work on a Proof-Of-Work (POW) model, such as Bitcoin. This is why, in the rest of this guide, we will essentially use the example of Bitcoin to talk about hashrate.
The mining of Bitcoin
Bitcoin transactions are grouped into blocks. For a transaction to be validated, the block must be checked by the network miners. This control consists in verifying the integrity of the transaction in order to validate it and to record it definitively on the blockchain. This action is called “mining”.
Concretely, on a POW model, the mining consists in a competition between the miners of the network. Indeed, each miner (or group of miners) works in parallel to validate a block. As soon as one of them completes the validation, the transaction is approved. The miner who completes the validation then receives a reward in BTC. Currently, minors receive 3.5 CCT per block validated.
On Bitcoin, a block is validated approximately every 10 minutes. With Bitcoin’s soaring price, it is easy to see why Bitcoin mining is more profitable than ever before. Of course, given the notoriety of Bitcoin, there are many miners, each better equipped than the last. So the competition is tough!
The mathematical function of hash
What is hash?
Hash is a mathematical function that transforms a file (image, text, etc.) into a hexadecimal string of bits. Hash is useful for storing data without requiring a large amount of storage space. This is why hash is used on blockchains to “digitize” transactions.
An important feature of hash is that each file has a unique hash. However, from the hash, it is impossible to trace back to the data in the source file. Indeed, the logical tools (“or”, “and”, “no”, etc.) behind the hash function make the result totally unpredictable. In concrete terms, let’s take the example of two text files that are entirely similar to each other to the nearest comma. By applying the mathematical function, you will get two completely different hashes.
What role does hash play in the mining of Bitcoin?
The Bitcoin blockchain algorithm uses a mathematical function called SHA-256. What does this mean? In Bitcoin, each block is “hashed” into a 64-bit hexadecimal string. This string is then transformed into a 256-bit binary language.
To mine a block, Bitcoin miners must find the right hash. How do they do this? For each block, a “Proof of Work” is provided to the miners. This “Proof of Work” consists of setting conditions on the hash. For example, a proof of work can be that the hash must start with a certain number of zeroes. Then, the miners go through iterations or “block hashing” until they find a hash that satisfies the condition issued by this proof of work.
As mentioned above, the hash cannot be predicted because it changes completely each time. This is why miners have to perform a large number of iterations before finding the right hash. The “Proof-Of-Work” model is therefore very energy consuming and requires a high-powered hardware.
The definition of hashrate
With all this, we still haven’t defined what hashrate is! By definition, the hashrate is a unit of measurement such as km/h for example. The hashrate (h/s) defines a computing power per second of a computer in the context of Bitcoin mining (or cryptomoney in general).
For large values, the hashrate can be expressed in Kilo (1,000), Mega (one million), Giga (one billion), Tera (trillion), Peta (quadrillion), Exa (quintillion) or Zeta (sextillion).
For example, a hashrate of 50 Kh/s means that your computer hardware is capable of calculating 50,000 hashes per second.
Why is the hashrate an important data in mining?
As mentioned above, it takes on average 10 minutes to mine a block on Bitcoin. This time is kept fixed by increasing the level of difficulty of mining. Approximately every 2016 blocks, the mining difficulty of a block is thus readjusted. Thus, even if there is an influx of miners and an increase in the computing power involved, the mining time of a block always remains fixed.
For a miner to receive a reward, he must therefore find the right hash first. This induces a very large number of operations. For example, you should know that on average, the hash is found after 2 to the power of 71 iterations! This shows how important it is to have a high-performance hardware to mine Bitcoin.
A powerful hardware is a computer with a high hashrate. Indeed, the higher the hashrate of a machine, the more hash you can calculate. On the other hand, the more powerful a hardware is, the more expensive it is. In addition, given the recent success of mining activities, there is a shortage of hardware. Finally, the power consumption of a powerful machine is more important. To calculate the profitability of your mining activities, do not forget to take into account all the parameters.
The right equipment to mine Bitcoin
If you are interested in mining Bitcoin, what power should you aim for? As explained above, you need to invest in top-notch equipment costing several thousand Euros. Even though the landscape is changing rapidly, what is the best mining equipment available today? Over the last few months, the two ASICs below were considered the best performing products for mining Bitcoin:
- AntMiner S9 with a hashrate of 13.5 TH/s ;
- Innosilicon Terminator 2-Turbo with a hashrate of 24 TH/s.
By way of comparison, for Litecoin mining, ASICs with a hashrate of several hundred MH/s or a few GH/s are sufficient. This illustrates the leap in performance between Bitcoin and other cryptos!
Moreover, the ASIC is not the only equipment you will have to buy! You will also need to invest in accessory equipment such as fans and backup generators. Yes, mining Bitcoin by yourself is profitable but requires a real investment and a real installation!
Would you like to get more information about Bitcoin and mining? Please contact us today.