Hashrates plays a vital role in cryptocurrency ecosystems.

For cryptocurrencies like Bitcoin that are using the Proof-of-Work (PoW) consensus algorithm, the higher the hashrate, the better the network is protected against cyber threats (such as 51% attacks).

The hashrate also impacts cryptocurrency mining and is correlated with Bitcoin’s price.

**Key takeaways:**

- The Bitcoin hashrate refers to the speed with which all miners combined are solving mathematical puzzles in the BTC network.
- The crypto hashrate is measured in hash per second (H/s), which has exponentially risen since Bitcoin’s birth in 2009.
- Bitcoin’s hashrate plays an important role in protecting against 51% attacks as the more the hash power in the network, the harder it is for hackers to take over the ecosystem.
- The higher the hashrate, the more difficult it gets for miners to generate blocks in PoW networks and vice versa.
- While the Bitcoin halving could result in short-term drops in hashrate, the hash power will potentially increase in the long run as more miners join the network to benefit from decreased competition.
- Based on historical data, there’s a high positive correlation between the BTC hashrate and price.
- However, during long-lasting bear markets, the correlation between the two variables can turn negative.

**What Is ‘Hashrate’ and What Does it Mean For
Bitcoin?**

In blockchain networks that utilize the Proof-of-Work (PoW) consensus algorithm, miners are required to use their computational power to solve complex mathematical problems to verify transactions and add new blocks to the distributed ledger.

The hashrate – also called hash power or hashing frequency – of each miner refers to the speed at which their mining equipment is solving the mathematical puzzles.

When we are talking about the total hashrate of a cryptocurrency, we add up the computational power of all the mining devices that are connected to the digital asset’s network.

A mathematical problem a miner needs to solve in PoW networks to generate new blocks is also called a hash. Because of the same reason, the most basic measure to quantify hashrates is hashes per second (H/s).

While this measurement worked decently in the very early years of Bitcoin, the BTC network has grown significantly in the past 11 years.

Mining technology has advanced rapidly during this period – with specialized, high-performing Application-Specific Integrated Circuit (ASIC) equipment dominating the Bitcoin mining space –, which led to the BTC community introducing new units to quantify hashrates.

Currently, Terahash per second (TH/s) is the standard unit for computational power. You can find all hashrate units below for reference:

- 1 Hash per second (1 H/s)
- 1 Kilohash per second (1 kH/s) = 1,000 H/s
- 1 Megahash per second (1 MH/s) = 1 million H/s
- 1 Gigahash per second (1 GH/s) = 1 billion H/s
- 1 Terahash per second (1 TH/s) = 1 trillion H/s
- 1 Petahash per second (1 PH/s) = 1 quadrillion H/s
- 1 Exahash per second (1 EH/s) = 1 quintillion H/s

In terms of hashrate, converting larger units to smaller units is pretty easy as you have to multiply the larger unit with 1,000 to calculate the value of the smaller unit (e.g., 10 TH/s x 1,000 = 10,000 GH/s).

**Hashrate and Security**

The total hashrate of the Bitcoin network influences multiple components of the cryptocurrency’s ecosystem.

To understand this, let’s start by explaining the primary function of the hashrate in Proof-of-Work networks: security.

Miners are required to leverage their computational power to solve complex mathematical puzzles in PoW ecosystems to add new blocks to the chain.

If a cybercriminal seeks to take over the Bitcoin network, he has to purchase mining equipment that has the computational power equaling or exceeding 51% of the total hashrate within the BTC ecosystem for the 51% attack to be successful.

Therefore, the attacker has to invest money to take over the cryptocurrency’s network. When the hashrate is low, malicious parties have a higher chance of conducting a successful attack as it requires a smaller investment on their end.

With major cryptocurrencies like Bitcoin – where millions of mining rigs are constantly running to secure the network – it’s nearly impossible for hacker groups to possess the hashrate they need to conduct a successful 51% attack.

**The Costs of a 51%
Attack in the Bitcoin Network (Example)**

The total hashrate of the Bitcoin network stands at 111 million TH/s at the time of writing this article.

Therefore, the attackers have to possess at least 116 million TH/s of computational power to take over the network with a 51% attack.

Let’s say that the hackers are using the same mining rig that costs $1,636 and has the hashrate capacity of 70 TH/s for the 51% attack.

The attackers would have to buy 1,657,143 million pieces of this product, which would cost them over $2.71 billion.

While this requires a massive initial investment from the hackers, this sum doesn’t even cover the electricity costs of running the mining hardware, which would be $464,000 for every hour the machines are operating (calculating with 2,8 kW/h and the electricity cost of $0.10 per kW/h).

If malicious parties seek to take over the Bitcoin network for a week, the total costs of the 51% attack would be increased by $78 million.

The Costs of a 51% Attack in the Bitcoin Network (Example)The total hashrate of the Bitcoin network stands at 111 million TH/s at the time of writing this article.

Therefore, the attackers have to possess at least 116 million TH/s of computational power to take over the network with a 51% attack.

Let’s say that the hackers are using the same mining rig that costs $1,636 and has the hashrate capacity of 70 TH/s for the 51% attack.

The attackers would have to buy 1,657,143 million pieces of this product, which would cost them over $2.71 billion.

While this requires a massive initial investment from the hackers, this sum doesn’t even cover the electricity costs of running the mining hardware, which would be $464,000 for every hour the machines are operating (calculating with 2,8 kW/h and the electricity cost of $0.10 per kW/h).

If malicious parties seek to take over the Bitcoin network for a week, the total costs of the 51% attack would be increased by $78 million.

**What Is the Impact of The Hashrate on Bitcoin
Mining?**

Bitcoin uses the PoW algorithm for reaching consensus, which requires miners to compete with each other to generate new blocks and earn block rewards for their efforts.

Block generation takes approximately 10 minutes on the BTC network.

To maintain the 10-minute block generation time, the Bitcoin network is utilizing a self-regulating mechanism to adjust the mining difficulty every 2,016 blocks, which comes down to about two weeks.

If the total hashrate increases in the ecosystem, the Bitcoin network will raise the difficulty of finding a new block for miners to keep the time to generate a block at (roughly) 10 minutes.

Therefore, we can safely say that the total hashrate of the network has a great influence on Bitcoin mining difficulty.

**Is the Price of Bitcoin Correlated with the Hashrate?**

The correlation of Bitcoin’s hashrate and the cryptocurrency’s price has been a hot topic in the digital asset space for some time now.

Correlation 101:

If Bitcoin’s price and hashrate correlate at 1, it means that they always move in the same direction.

The higher the rate, the more the two variables are related to each other and vice versa (e.g., a correlation of 0 means that the BTC hashrate and price are not correlated at all).

There can also be a negative correlation between the two variables. A correlation of -1 would mean that there’s a great relationship between the Bitcoin price and hashrate, but they move in the opposite direction.

Cointelegraph’s data, suggests that there is indeed a high correlation between Bitcoin’s hashrate and price, with the rate being at 86.2% in 2016 and 91.5% in 2017.

While the digital asset’s price and network hashrate were moving in the same direction in 2016 and 2017, the correlation turned negative (-66.2%) during 2018’s bear market.

However, as soon as the “crypto winter” was over in 2019, the correlation between BTC’s hashrate and price turned positive again, with a yearly rate of 59.5%

The data indicates that, normally, there’s a high positive correlation between the Bitcoin price and the network hashrate. However, a long-lasting bear market could quickly turn this correlation negative.

**Bitcoin Halving’s Effects on the BTC Hashrate**

With the Halving coming up in May 2020, it’s important to talk about Bitcoin halving and its potential effects on the BTC hashrate as well.

The Bitcoin halving is a major event in the cryptocurrency’s ecosystem, which cuts the amount of block rewards by 50% every four years.

Currently, a miner who successfully solves a mathematical puzzle and adds a new block to BTC’s chain receives a reward of 12.5 BTC. After this year’s halvening, the same miner will receive only 6.25 BTC.

This is indeed bad news for miners (as they earn less for the same work), and a part of them – especially the ones who have only meager profit margins – will stop their operations, lowering the hashrate of the Bitcoin network in the short term.

However, since Bitcoin halvings so far have driven a major bull market, assuming this will happen again, more miners will join the network to profit from the price increase and to take advantage of the lower competition.

Therefore, the Bitcoin halving will have a negative effect on the hashrate in the short term, but it will possibly result in a hash power increase in the long run.

**A Brief Look Into Bitcoin’s Historical Hashrate**

After Satoshi Nakamoto created Bitcoin in 2009, the network was maintained by only a handful of miners who were early cryptocurrency enthusiasts.

At the time, the crypto space was lacking ASIC miners. Thus, miners used normal computer hardware to maintain the Bitcoin network.

As a result, the total hashrate of the BTC network didn’t exceed 10 MH/s (roughly the hashrate of one GPU that costs $150 now) until early 2010.

As people started to embrace Bitcoin – and with the launch of the infamous Mt.Gox crypto exchange –, BTC’s network hashrate surged exponentially throughout 2010, ending the year with a hash power of 117 GH/s, increasing the computational power of the cryptocurrency by 11,700x times in one year.

With the exception of minor drops, the digital asset’s hashrate continuously grew until the first Bitcoin halving on November 28, 2012.

As the 50% reward decrease discouraged some miners from continuing their operations, the BTC hashrate fell from 27 TH/s to 18 TH/s in roughly three weeks.

Despite the short-term drop in hashrate, the Bitcoin network’s computational power resumed its growth, with the first major fall occurring in November 2018 at the peak of the crypto bear market when the digital asset’s price decreased as low as $3,100.

As a result, a large number of miners had disconnected from the Bitcoin network as they were struggling to make profits amid bear market conditions. The BTC hashrate fell from 60 EH/s to 34 EH/s in a little over 30 days.

By March 2019, the hashrate started to stabilize and reached 50 EH/s, gradually increasing to nearly 100 EH/s by the end of the year.

In 2020, the BTC hashrate continued its growth. However, the uptrend was halted in early March as a possible result of the coronavirus pandemic, crashing from 133 EH/s on March 5 to 85 EH/s on March 20.

However, after reaching its low on March 20, BTC’s hashrate entered into a major uptrend, standing at 111 EH/s as of today.

**How Is The Hashrate Distributed Among Bitcoin Miners?**

Successfully generating a block in the Bitcoin network is like winning a lottery, and so to increase their chances miners have formed pools to increase their chances of gaining block rewards.

As a result, most of the BTC network is possessed by large mining pools, with 65.6% of the total computational power held by the top four pools.

According to BTC.com’s data, individual (or unknown) miners make for only 0.4% of the total hashrate.

**Hashrate: an Important Component in Bitcoin’s
Ecosystem**

For PoW blockchains like Bitcoin, hashrates play a crucial role in the ecosystem.

The more the hash power in the ecosystem, the better the network is protected from 51% attacks.

Historical data indicates that, normally, there’s a high positive correlation between Bitcoin’s price and hashrate.

However, the same data indicates that the correlation between the two variables could turn negative in long-lasting bear markets, meaning that BTC’s hash power and value will move in the opposite direction.

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