Everything in our lives that performs work is measured in units of work over time. Cars travel in miles per hour. Your fitness tracker measures your heart’s beats per minute. The same is true of altcoins and their “hash power.” Hash power, despite sounding like a diner special, is really how much work the entire altcoin network is doing over a ten-minute interval.
Remember that all altcoins are networks. Everybody who has a proper “client” for the altcoin, AKA a node, is contributing some computing power to keeping the network going. The more nodes you have and the more computing power those nodes are contributing to the network in a given ten-minute span, the higher the overall “hash power” or “hash rate” of the altcoin’s network.
What does “hash power” do? It mines or mints new altcoins, calculates the blocks, processes the transactions that are added to the blockchain, and so on. So the higher the hash power, the more efficiently and cost-effectively the network operates. This is why bitcoin miners spend thousands on high-end graphics cards, as it lets them process more transactions that much faster.
Check out the historical trend of the hash power of an altcoin before you invest. It will tell you how quickly and cheaply transactions can be processed and also give you some indication of the overall health of the altcoin. After all, if there are not a lot of nodes on the network, that is not a good sign for the altcoin as an investment. Want to learn more about the financial impact of networks and nodes? Subscribe to the Bitcoin Market Journal newsletter!
