New data tells us that mining a single Bitcoin or one BTC costs the largest public mining companies over $82,000 USD, which is nearly double the figure it did the previous quarter. Estimates for smaller organisations say you need to spend about $137,000 to get that single BTC in return. BTC is currently only valued at $94,703 USD, which seems to be a problem in the math department.
Bitcoin mining will always be profitable for the people with the cheapest electricity and largest economies of scale. There is a difficulty adjustment algorithm in the protocol that ensures this. When the price tanks people turn off thier miners, difficulty adjusts downwards, and then it takes less electricity to find a block.
tl;dr title is wrong
The headline isn’t accurate as usual, but isn’t completely wrong either. Anyway, the article you’ve quoted is more informative than the one I posted, so thanks for that quote.
We’re at a point where it’s no longer profitable for individual miners, even if we ignore externalities like the cost we’re collectively paying due to pollution and carbon emissions.
Mining require increasing amount of energy and resources as time pass, so unless there’s a radical change in bitcoin’s algorithm or unless energy becomes free, we should expect mining to get non-profitable in more and more situations.
We’re at a point where it’s no longer profitable for individual miners
We have been at that point since GPU mining stopped being feasible in 2014, it’s just gotten worse. ASICs made it so the only people who could profit off mining were people who could place a wholesale sized order of hardware from bitmain, etc. Anyone else who claimed to be mining profitably was likely someone who was:
- buying old hardware 2nd hand (or new hardware at MSRP) and capitalizing on free electricity in their rental
- not selling their Bitcoin immediately (they weren’t making money from mining, they were making it from speculating)
- lived in Quebec and could double dip (North America’s cheapest grid + free heating for 8 months of the year)
unless there’s a radical change in bitcoin’s algorithm
The algorithm already does this though. Every 2016 blocks if it took more than 10 minutes per block, the difficulty of mining bitcoin goes down, not up. This is why every halving event you see a radical drop in difficulty, because at a given kWh you are producing half as many bitcoin - meaning people turned off their miners because it’s less profitable. The flipside is the rate of issuance goes down, so there is a lower inflationary effect, and the price of Bitcoin usually also skyrockets (which means eventually these miners re-enter, and difficulty eventually goes back to where it was). It can never get to a point where Bitcoin mining is completely unprofitable unless the price goes to zero, because there will always be a guy with a solar panel and fully paid-off hardware who can mine it for free. Granted, it can get to a point where a lot of people have to take a huge loss on capital expenditures if the price nosedives and never recovers
I don’t believe this is necessarily true. Miners like Riot Blockchain are operating at a loss and other people are stealing electricity.
Miners like Riot Blockchain are operating at a loss
I’m not a finance wizard, but I peeked at their last SEC filing, and first 3 quarters of 2024 they posted a 35m operating loss, but added almost 900m worth of assets to their balance sheet (mostly Bitcoin), which to me tells a very different story
That’s because they diluted their stock and sold it. The income doesn’t come from mining Bitcoin.
There is nothing in the algorithm tied to BTC price. Sure, you’ll likely tend to get less miners as the price decreases, but that doesn’t guarantee that it’s profitable. Plenty of people, organizations, governments, etc do things that aren’t immediately profitable and may never be.
By design, it’s supposed to be barely profitable, so it makes sense it would cross that boundary once in a while. Then some miners leave the network or slow their hash rate, the difficulty is adjusted automatically, and it becomes profitable again. It’s actually a pretty interesting strategy.
Ostensibly, the difficulty depends on how many miners there are on the network. More miners = more difficult. Fewer miners = less difficult. The “difficulty” is just how “lucky” you have to be to hit a successful hash on a block. The block’s hash is based on the previous block + all the transactions you include in your block + a random number you add. That random number is what you change to try to hit a successful hash. If the hash starts with a certain number of zeroes, you have a successful block you can add to the chain, and you’re rewarded with some brand new coin in your wallet (you include that in the transactions in your block). If not, you change the random number and try again. How many times you have to try again is controlled by the leading zeroes requirement. You’re competing with every other miner on the network to find a successful block first.
The amount of new coin constantly goes down as the chain gets longer, until it hits zero and mining doesn’t create new coin. Then, you would charge a fee for including someone’s transaction (a lot of miners already charge a fee). The more zeroes required at the start of the hash, the “harder” it is to mine. The network automatically adjusts how many zeroes are required to keep new blocks being added at a roughly constant rate (one block every ten minutes is the target).
All of this is enforced by the algorithm Bitcoin miners use. If a “rogue miner” submits a block that doesn’t meet these criteria, the other miners just reject the block and don’t add it to their copy of the blockchain. The consensus is what really matters, and no one entity controls a majority of miners. Each miner has their own copy of the entire blockchain, so each miner can validate any block it receives before adding it to the chain.
Fewer miners would mean blocks are being added too slowly at the current difficulty, and the network adjusts to make it easier to hit a successful hash. The network automatically adjusts difficulty every 2,016 blocks (it’s all just math, and it’s part of the Bitcoin algorithm), which is roughly every 2 weeks. So, it should in theory only be not profitable for up to two weeks.
(Please note that this is simplified to the point of being technically wrong, but in principle, that’s how it works. Technically, in a mining pool, you can still get rewarded even if you don’t hit a successful hash. You get rewarded based on the hash rate you provide to the pool, with the understanding that you won’t get the full reward when you hit a successful block. Also, it’s not really about the number of zeroes, but a “target” hash that your hash needs to be “below”. A hash might have the same number of leading zeroes, but not be below the target, so wouldn’t be successful. That’s really unlikely. In practice, this basically means more leading zeroes. If the target got high enough, it can even have no leading zeroes. That would probably require an intergalactic sized network.)
Thanks for the refresher. I’m aware of the basics, but assumed the difficulty measured by the number of zeros could only increase. Apparently difficulty can decrease, and I’ve read it’s expected to decrease very soon to keep the system running a while longer.
Bitcoin’s creator was smart enough to design a system that automatically adjust to remain profitable for several years without intervention, but not smart enough to foresee social and environmental costs.
It’s a good example that illustrate why automated systems shouldn’t be left running unsupervised, even if it’s designed by the best minds with the best of intentions.
There are other methods of operating a blockchain, besides proof of work, which are much more energy efficient. Think of Bitcoin being like a coal fired power-plant and some other cryptos based on proof of stake being akin to solar panels.
but also proof of stake is just taking off the mask and outright saying that rich people control the network
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bitcoin mining hasn’t been profitable for a long time. Like, a decade or so.
