How To Calculate The Hash Difficulty Of Bitcoins

How To Calculate The Hash Difficulty Of Bitcoins and the transaction hash.

Hash power, also known as hash speed, are synonymous terms employed to describe the collective computational power of a particular cryptographic currency’s network. The operation of any hash mineable Cryptocurrency is sustained by the collective computing power of all miners participating in that network. That means if one computer goes offline, all the computers that use that computer’s hash power suffer damage. If a large number of computers go down at the same time. The entire hash network is brought to a screeching halt until further instructions are received from other computers.

Understanding Hash power Transaction

What is hash power and how do we calculate the transaction id


In order to estimate how much hash power a particular server is generating per second, it is necessary to calculate the hash rate / (blocks per second multiplied by total hash power / total transactions per second) ratio. This is known as the Diffie-Calculated Shuffling Efficiency. For a given block in a given length of time, the castrate / transaction ratio can be determined. You can also do the calculation for longer blocks. A high percentage of transactions and a low percentage of hashrate will give an indication of the difficulty of solving for the given period of time.

How To Calculate Hash Power

To better understand how to Calculate hash power, we need  to see example. Assume the goal is to generate one million Hashes per second. Obviously this would require a lot of computational power. Assuming the difficulty of finding collisions is one thousandth part of a billion, a computer should be able to find the target within a record amount of time. See how you can benefit Investing in Cryptocurrency. 


Now let’s assume we have already found the target and there are only two miners working towards it. Let’s suppose these two do not collide on their way to the goal. What does the network do? Assuming no one has sent a transaction yet, the network follows the rule that every time two blocks are merged together, the chance of two of them collide is also reduced by half.


Therefore we have one less block that the miner needs to finish to get their results. This leaves more time for the others to collide with the slower blocks and end up with a smaller castrate and less revenue from generated nonces. In a short summary, a miner needs to find a way to make the diffused hashrate / transaction ratio goes above one thousandth of a percent. There are several ways to increase this, but the two above are the most popular.

What is a transaction hash/hash ID?

A transaction hash/id is a unique string of characters that is given to every transaction that is verified and added to the blockchain. In many cases, it need a transaction hash in order to locate funds. It commonly appears at the top of the page when viewing your transaction through a block explorer website, or you can find it by copying the URL from that same page.

Depending on the type of digital currency that was sent, you can find the transaction hash/id by searching your blochain wallet address on a block explorer. You can equally check your transaction hash on Coinbase explorer.


Hashing and data structures

A data structure is a specialized way of storing data. There are two data structure properties that are critical if you want to understand how a blockchain works. They are:

  1. Pointers.
  2. Linked Lists.


Pointers are variables in programming which stores the address of another variable. Usually normal variables in any programming language store data.

Eg. int a = 10, means that there is a variable “a” which stores integer values. In this case, it is storing an integer value which is 10. This is a normal variable.

Pointers, however, instead of storing values will store addresses of other variables. Which is why they call it pointers, because they are literally pointing towards the location of other variables.

Linked Lists

A linked list is one of the most important items in data structures. This is what a linked list looks like:

Hash power

It is a sequence of blocks, each containing data that is links to the next block via a pointer. The pointer variable, in this case, contains the address of the next node in it and hence the connection is made. The last node, as you can see, has a null pointer which means that it has no value.

One important thing to note here, the pointer inside each block contains the address of the next block. That is how it achieves the pointing. Now you might be asking what does that means for the first block in the list? Where does the pointer of the first block stay?

You can call the first block the “genesis block” and its pointer lies out in the system itself. It sort of looks like this:

Hash power

Hash Pointer

If you are wondering what the “hash pointer” means, we will get there in a bit.

As you may have guessed by now, this is what the structure of the blockchain is based on. A blockchain is basically a linked list. Let’s see what the blockchain structure looks like:

What Is Hashing? Under The Hood Of Blockchain

The blockchain is a linked list that contains data and a hash pointer that points to its previous block, hence creating the chain. What is a hash pointer? A hash pointer is similar to a pointer, but instead of just containing the address of the previous block it also contains the hash of the data inside the previous block. This one small tweak is what makes blockchains so amazingly reliable and trailblazing.

Imagine this for a second, a hacker attacks block 3 and tries to change the data. Because of the properties of hash functions, a slight change in data will change the hash drastically. This means that any slight changes in block 3, will change the hash which is in store in block 2, now that in turn will change the data and the hash of block 2 which will result in changes in block 1 and so on and so forth. This will completely change the chain, which is impossible. This is exactly how blockchains attain immutability.

So what does a block header look like?

What Is Hashing? Under The Hood Of Blockchain

A block header contains:

  • Version: The block version number.
  • Time: the current timestamp.
  • The current difficulty target. (More on this later).
  • Hash of the previous block.
  • Nonce (more on this later).
  • Hash of the Merkle Root.

Right now, let’s focus on the Hash of the Merkle Root. But before that, we need to understand what a Merkle Tree is.

What is a Merkle Tree?

Hash power

The above diagram shows what a Merkle tree looks like. In a Merkle tree, each non-leaf node is the hash of the values of their child nodes.

Leaf Node: The leaf nodes are the nodes in the lowest tier of the tree. So wrt the diagram above, the leaf nodes will be L1, L2, L3 and L4.


What Is Hashing? Under The Hood Of Blockchain

Child Nodes: For a node, the nodes below its tier which are feeding into it are its child nodes. Wrt the diagram, the nodes labeled “Hash 0-0” and “Hash 0-1” are the child nodes of the node labeled “Hash 0”.

Root Node: The single node on the highest tier labeled “Top Hash” is the root node.

Hash power

So what does a Merkle Tree have to do with blockchains?

Each block contains thousands and thousands of transactions. It will be very time inefficient to store all the data inside each block as a series. Doing so will make finding any particular transaction extremely cumbersome and time-consuming. If you use a Merkle tree, however, you will greatly cut down the time required to find out whether a particular transaction belongs in that block or not.

Let’s see this in an example. Consider the following Merkle tree:

What Is Hashing? Under The Hood Of Blockchain

Now suppose I want to find out whether this particular data belongs in the block or not:

Hash power

Instead of going through the cumbersome process of looking at each individual hash and seeing whether it belongs to the data or not, I can simply track it down by following the trail of hashes leading up to the data:

What Is Hashing? Under The Hood Of Blockchain

Doing this significantly reduces the time taken.

Hashing in mining: The crypto puzzles.

When we say “mining”, it basically means searching for a new block to add in the blockchain. Miners from around the world are constantly working to make sure that the chain keeps on growing. Earlier it used to be easy for people to mine using just their laptops, but over time, people started forming mining pools to pool in their computer powers and mine more efficiently.

This, however, could have been a problem. There is a cap for each cryptocurrency, eg. for bitcoin, it is just 21 million. There are only 21 million bitcoins out there. If they allow the miners to carry on, at this rate, they will fish out all the bitcoins in existence. On top of that, there needs to be a specific time limit in between the creation of each blocks. For bitcoin, the time limit in between block creation is 10 mins. If the blocks were allowed to be created faster, it would result in:

  • More collisions: More hash functions will be generated which will inevitably cause more collisions.
  • More orphaned blocks: If a lot of miners are over mining they will come up with new blocks simultaneously. This will result in or more blocks not getting to be part of the main chain and becoming orphan blocks.

So, in order to restrict block creation, a specific difficulty level is set. Mining is like a game, you solve the puzzle and you get rewards. Setting difficulty makes that puzzle much harder to solve and hence more time-consuming. WRT bitcoins the difficulty target is a 64-character string (which is the same as a SHA-256 output) which begins with a bunch of zeroes. A number of zeroes increases as the difficulty level increases. The difficulty level changes after every 2016th block.


I hope you found this article informative. Therefore you understand hashing and how transaction hash works. I will be releasing articles on several different subjects on how electricity and bitcoins work together. Stay tuned. As more people start to realize how they make more electricity and bitcoins, we will keep you to date by releasing more articles. I sincerely hope you will become one of the many enlightened people that are about to change the world with the power of the hash code.

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