What Does Hashrate Mean and Why Does It Matter?

Before new transactional data can be added to the next block in the chain, miners must compete using their machines to guess a number. More specifically, miners are trying to produce a hash that is lower than or equal to the numeric value of the ‘target’ hash by changing a single value called a ‘nonce’. Each time the nonce is changed, an entirely new hash is created. This is effectively like a lottery ticket system, where each new hash is a unique ticket with its own set of numbers.

For example, if we take “coindesk” and change the first letter to make “foindesk,” we get this completely different hash = 5a12a9af1b5794bf6855c15944339d41ff713665e415b5434b8c9f081c61b66a

Because each hash created is random and impossible to predict, it can take millions of guesses – or hashes – before the target is met and a miner wins the right to fill the next block and add it to the blockchain. Each time that happens, a block reward of newly minted coins is given to the successful miner along with any fee payments attached to the transactions they store in the new block.