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The bitcoin network’s computational power has expanded dramatically as a result of miners’ geographic movement and the addition of additional mining equipment.
The new year has seen a surge in the hash rate of bitcoin. According to Glassnode statistics, the global hash rate has increased to 208 million trillion hashes per second. The previous all-time high of 198.5 million terahashes per second was attained on Apr. 15, 2021, according to blockchain.com. This demonstrates that bitcoin has recovered from the hash rate decline associated with China’s multi-state crackdown on cryptocurrencies in 2021. According to Bitfury, the majority of the recovery is attributable to the introduction of “new generation technology,” not the movement of equipment from China that would have been too inefficient to operate in other nations.
The Chinese crackdown has taken a toll on the BTC hash rate.
Beijing regulators started examining local miners’ energy use in April 2021, issuing notifications to data centres for further information on bitcoin mining. China prohibited banks from selling crypto services in May 2021 and launched a systematic crackdown on mining activity. This resulted in a steady decline in hash rate, which reached an all-time low of 58.4 million terahashes/s on Jul. 21, 2021. This resulted in a decrease in pricing to $29.79K. Previously, on Apr. 15, 2021, a $62K price high coincided with a surge in the worldwide hash rate.
According to Jason Zaluski of Toronto-based Hut 8 Mining Corp, “China’s mining prohibition simply triggered a regional shift…We consider this [expansion] of relations with other nations, notably Canada and the United States, as a net benefit.” He was not incorrect, since US industries benefited from displaced Chinese miners seeking a safe refuge to mine. Other nations have also witnessed an increase in mining activity as a result of their low power prices.
Why is hash rate so critical?
The hash rate is a measurement of the amount of processing power supplied to the bitcoin network. Whenever a transaction is validated, it is included in a block on the blockchain. Hashing a block verifies the validity of transactions. To get bitcoins, a miner must successfully “hash” the header of a block, which includes a censored version of the block’s transaction data. As the difficulty of locating the hash increases with the number of coins mined, a greater hash rate (more processing power) increases the possibility of a miner earning a bitcoin reward. Because hash rate computations are imprecise, it is preferable to evaluate hash rates over longer time periods, such as weeks or months.
The hash rate is critical in defining the network’s security. The more honest miners on the network, the more secure the network becomes.
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