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Hash rates and mining difficulty: What are they and why do they matter?

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The term “hash rate” is used when assessing mining equipment and the overall computing power of a blockchain. In this article, we’ll explain what it means and the implications it has.

The hash rate is an indicator of the performance and efficiency of cryptocurrency mining equipment. The unit of measurement is X/s, or hashes per second.

The overall hash rate of a blockchain is calculated based on the number and type of devices used for mining. The larger a miner or mining pool’s hash rate, the more quickly blocks are mined and the higher the chances of receiving a reward for adding a new block to the blockchain.

Another important crypto mining indicator associated with hash rates is mining difficulty. The difficulty of mining is directly dependent on the blockchain hash rate, so let’s take a look at it.

Cryptocurrency mining difficulty: What is it, why is it needed and what is it based on?

Mining difficulty is an indicator expressing how hard is it to solve a cryptographic problem to mine the next block and receive a reward. This parameter refers to the number of times on average the hash value needs to be calculated in order to mine a new block.

Why a difficulty parameter is needed

Mining Bitcoin and other cryptocurrencies that use the PoW consensus mechanism remains profitable as long as the value of the cryptocurrency being mined exceeds the costs of the mining equipment and electricity consumed. The difficulty indicator is very important, as it shows how powerful the equipment needs to be in order to successfully mine a given token.

In essence, the difficulty rating helps miners figure out which device is best for mining crypto on a particular network in terms of energy efficiency and profitability.

Additionally, the mining difficulty allows the network to control the rate at which new tokens are issued.

How and why is the mining difficulty changed, and how is the figure decided?

The difficulty parameter directly depends on the overall blockchain hash rate and the time it took to solve the preceding blocks.

When a blockchain is launched, it sets a specific time frame for the production of new blocks. If new miners join the network, performance increases, the hash rate goes up, and blocks are mined faster than the set time. In such cases, the network increases the mining difficulty. The reverse also happens: if there are fewer miners, the hash rate decreases, blocks take longer to mine, and the difficulty is lowered.

Let’s take the Bitcoin network as an example. On this blockchain, the difficulty changes every 2,016 blocks (approximately once per fortnight). According to Satoshi Nakamoto’s protocol, a block should be mined every 10 minutes, so it should take around 14 days to mine 2,016 blocks.

If the previous 2,016 blocks were mined faster than the planned time, then the mining difficulty increases. If it took longer, the difficulty decreases.

The mining difficulty and network hash rate are interconnected. If you divide the difficulty parameter by the overall network hash rate, you’ll arrive at the average time to solve a new block.

What is the hash rate, why is it needed and how is it measured?

The term “hash rate” refers to the unit of measurement for cryptocurrency mining equipment performance. At this point, there are many options for mining equipment, and certain devices have even been designed specifically to solve hashes. They are known as ASIC miners.

When it comes to crypto mining, performance comes down to the speed at which cryptographic problems – calculating the hash of a block that matches the difficulty set by the network, to be precise – are solved. You can find out more about it in this article but, to put it simply, miners calculate the block hash over and over again in an attempt to find one which is equal to or less than the hash value set by the network. The hash rate refers to the number of these operations, or hashes, that a mining device can process each second.

As it becomes more and more difficult to mine coins over time, the figure is very rarely expressed as “X/s” now. On modern blockchains, very powerful equipment is required to solve cryptographic problems, and so various prefixes are used to indicate the hash rate: “mega-”, “giga-”, “tera-”, “peta-”, “exa-” etc. This gives us hash rates that are calculated in magahashes per second (MH/s), gigahashes (GH/s), terahashes (TH/s) and so on.

The hash rate value: How to calculate it and the implications it has

You can find out the computing power of an ASIC on the website of the manufacturer or reseller. Bear in mind that the hash rate provided in the specifications represents the potential performance, while the real-world performance when mining coins depends on many other factors, including: 

  • Connection. The technical standard used to connect the video adapter to the motherboard can affect the hash rate. Different interfaces have different data transfer speeds.
  • Temperature. Any powerful computing device heats up. The hotter the ASIC gets, the more slowly it runs. ASICs therefore require adequate cooling.
  • OS. The operating system provides the script that initiates the hash selection process, and carries out a number of maintenance tasks that can take up an impressive amount of the video adapter's resources. The more resources the OS consumes, the lower the final hash rate.
  • Timing. What’s important here is the time it takes the graphics card to execute a single command. The default settings may block the maximum hash rate of your newly purchased equipment. Specialist websites provide information about the optimal timings for mining specific cryptocurrencies. If you set them correctly, the video card won’t wait idly for the next command after the previous one was executed.
  • Mining pool. Pools can connect their scripts to mine tokens more efficiently. When you’re joining a team, you should look at the options carefully, because the scripts aren’t always high-quality.

The hash rate also depends on the specification of the equipment, the mining algorithm and the popularity of the cryptocurrency. To mine crypto as efficiently as possible, therefore, you should take all of the factors that affect the hash rate into account.

How and where to calculate mining profits

If you know the hash rate of your equipment, you can calculate the approximate profit you’ll generate by mining crypto using special mining calculators like CryptoCompare and NiceHash.