Bitcoin mining news: hash power at highs, and earnings at lows

Bad news for Bitcoin miners: earnings are at lows due to very high hash power. 

Mining is a competition that effectively puts 6.25 BTC up for grabs every 10 minutes or so.

This prize is awarded to the single miner who succeeds in validating a block, while all others who have tried unsuccessfully collect nothing. 

Lately, more than 80% of blocks are mined from just five pools, because those with greater hashrate are more likely to succeed in mining a block. 

Bitcoin mining news: hashrate levels and average earnings

Hashrate is simply the number of hashes that can be produced in one second. 

Hashes are the alphanumeric strings that validate blocks, and currently more than 300 billion of them are generated worldwide every second. 

The fact is that in order to maintain close to 10 minutes the average time needed to find the single hash that validates a block, the Bitcoin protocol increases the difficulty, thereby also increasing the hashrate required to be able to find that hash. 

The difficulty is currently at an all-time high (55.6T), precisely because of the fact that the hashrate globally is also at an all-time high. 

Actually, the highest overall daily hashrate was touched in early July, but a second peak not far behind was touched in mid-August. 

It is worth noting that the block-time has been almost consistently below 10 minutes in the second half of August, and has stabilized above 10 minutes only after the latest increase in difficulty last week. 

In addition to this, it is important to note that hashrate decreased somewhat, globally, after the last difficulty increase, due to the collapse in earnings. 

The drop in earnings

While miner revenues remain more or less the same, as fees vary but not by much, the same cannot be said for costs. 

The costs of mining are substantial, and they increase as the difficulty increases. 

The main cost is that of electricity, and it increases as consumption increases. 

These in turn increase as difficulty increases, because an increase in difficulty forces more hashes to be mined, resulting in higher energy consumption. 

While in July an average profitability of more than $0.08 per Th/s per day could be achieved, with last week’s increase in difficulty this figure plummeted even below $0.06. 

Since profitability is calculated in dollars, while earnings are in BTC, the price of Bitcoin strongly affects this metric. 

In fact, as early as late 2022, after the collapse below $16,000 due to the FTX bankruptcy, it had largely fallen below $0.06, but by January that metric was back above $0.07.

The coup de grace came simultaneously from Bitcoin‘s price falling back to around $26,000, and the increase in difficulty taken to all-time highs. For the miners, it was a bloodbath. 

The problems of mining

All of this, truth be told, has no significant impact on Bitcoin’s operation. In fact, the collapse in mining earnings does nothing more than drive the least efficient miners, or those forced to pay more for electricity, out of the market – often only temporarily – leaving the earnings to others. 

The Bitcoin protocol has no need for that much hash power, therefore the less efficient miners will simply exit the market temporarily without any significant consequence for Bitcoin. 

For a while, the block-time might remain above 10 minutes, but with the next difficulty update, scheduled for next week, even this minor matter should be remedied. 

Moreover, such a phenomenon forces miners to reduce energy consumption, thus also reducing the environmental impact of Bitcoin mining. 

It is worth mentioning that should the market value of BTC go back up, this trend would simply reverse, as it did in January, for instance. 

Next year, in the spring, the reward for miners will be halved, thanks to so-called halving, bringing it to 3.125 BTC per block. Miners are already fully aware of the situation, and have probably already taken countermeasures as well. 

Therefore, a further reduction in Bitcoin mining energy consumption in 2024 is to be expected, although in the event of a new bull run it could rise again.