Being decentralized, the hash rate, mining difficulty, and electricity are four ingredients that make the Bitcoin network powerful and secure.
Bitcoin (BTC) has been growing as one of the most powerful and attractive blockchain networks in the market. However, analysts have difficulties to explain why the network is so powerful and which are all the benefits it gives to society as a whole.
First of all, we need to understand that Bitcoin works with a Proof-of-Work (PoW) consensus algorithm. Moreover, this algorithm is very useful to process transactions and keep the network secure. In detail, this PoW network includes miners that acquired large and expensive hardware equipment. In addition, it allows them to run all the necessary calculations to keep the whole blockchain running.
To measure the strength and security provided by miners, the network provides clear information about the power that these hardware machines produce. This can be measured with the Hash Rate. Thanks to these miners, the Bitcoin network is decentralized and provides great services to users.
Bitcoin was created as a global digital currency. Moreover, the currency is aimed at providing decentralized financial services to individuals and companies all over the world. Nowadays, the financial system is controlled by centralized financial organizations that control all the transactions that take place around the globe.
With Bitcoin and its decentralized network, it is possible for its users to perform these cross border payments. Additionally, without depending on a centralized third party. Normally a third party would confirm and accept the transactions that are being processed by the network.
This reduced the friction in international payments that can be now performed using the Bitcoin network without having to rely on third parties with their own interests, high fees and slow transaction times. It is worth mentioning it is possible to send a Bitcoin transaction in just a few minutes.
Blockchain Hash Rate
Bitcoin’s hash rate is the computing power provided by the whole community of miners all over the world. The larger the hash rate, the more secure the network becomes. Hash rate grows over time when efficient miners can profit from the prices in the crypto market.
They need to sell the funds they get in order to pay for electricity bills, mining farms, maintenance, workers, internet connection and more. The hash rate indicates how powerful and secure the Bitcoin network is.
The largest the hash rate, the healthier the network is and the more secure it becomes. This is part of the Proof-of-Work consensus algorithm adopted by the Bitcoin network.
Bitcoin Mining Difficulty
Bitcoin’s network difficulty is the measure used by the Bitcoin network in order to attract more or fewer miners. This is used as a way to incentivize or disincentivize miners to enter the market. The lower the difficulty, the easier it will be for miners to participate in the network.
When difficulty falls, it’s because there has been a miner capitulation or more miners are leaving rather than entering the Bitcoin network. A larger or growing difficulty will make it more difficult for miners at current prices to stay profitable. Only the most efficient users and miners will be able to remain operative in the space.
This happens if the price of Bitcoin skyrockets and miners enter the space in a short period of time. If that happens, the difficulty will adjust itself to reflect a new equilibrium in the network.
Electricity is one of the most important things to take into account at the hour of evaluating the Bitcoin network. Bitcoin is considered to be a high consumption network. Indeed, according to the Bitcoin Energy Consumption Index, Bitcoin miners (the Bitcoin network) consume 77.78 TWh per year. This is equal to the electricity consumed by the Philippines, Chile or almost Finland.
Indeed, all the electricity used by Bitcoin miners could easily be used by an entire country. For example, they could power the entire electricity needs of the Czech Republic or almost 70% of the Netherlands. This shows how secure the Bitcoin network is and how powerful it became in just over ten years.
Since the very beginning, analysts and experts have been thinking about reducing CO2 emissions. In particular, how to reduce CO2 emissions from Bitcoin mining activities. In the future, the Bitcoin network could be used by energy companies. Spare energy can be translated into new BTC firms could earn by providing greater security to the whole Bitcoin network.
If a hydroelectric dam produces more energy than the one demanded, it may be possible for it to use the excess of energy to mine Bitcoin. This would make the network much more secure and it would allow the company running the dam to get rewarded for the energy they would not be using.
In this article, we have seen how powerful the Bitcoin network is and how much it grew in the last 10 years. Besides, when the network grows in size the security increases also, thanks to four main ingredients which are: decentralization, hash rate, difficulty, and electricity. Finally, if you combine all these factors the decentralized Bitcoin network is about 100.000 times more powerful than all top 500 computers combined.
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