Bitcoin mining in numbers: 4,000 USD per BTC, transaction fees drop sharply

  • As CoinShares states in a recent report, Bitcoin is still able to mine for USD 4,000 per BTC.
  • At the current Bitcoin price, the company expects the entire BTC mining industry to be profitable on average.

The digital asset management company, CoinShares, recently released a report entitled “The Bitcoin Mining Network”. In this report, CoinShares examines the current state of the Bitcoin mining market and provides analysis of break-even costs, geographical distribution and the impact of the power consumption. As CNF reported, CoinShares also noted in its report that Chinese miners are on the rise and now claim 66 percent of the current Bitcoin hashrate.

Beyond this, the report provides numerous other interesting insights. CoinShares found that Bitcoin miners received a total of $5.5 billion in block rewards during 2018, of which $5.2 billion (94.8%) came from newly created BTCs and $284 million (5.2%) from transaction fees. In 2019, according to CoinShares, a similar result of 5.4 billion US dollars is expected.

However, according to the report, transaction fee revenues will fall sharply in 2019. While transaction fees in 2017 were $554 million and $284 million in 2018, they are expected to be as low as $171 million in 2019. CoinShares attributes this to lower overall transaction demand and the introduction of SegWit (Segregated Witness), which reduced transaction size and increased capacity for transactions in one block.

Bitcoin mining for less than USD 4,000 possible

The report also states that Bitcoin mining is still possible for less than 4,000 USD per BTC if a combination of very cheap electricity (< 0.03 USD/kWh) and the latest mining hardware is used. According to CoinShares, the cost of obtaining one Bitcoin can drop even further if the miners are sold at discounted prices or are operated by the manufacturers themselves (such as Bitmain).

With an electricity price of 0.04 USD/kWh and a 30-month depreciation, the estimate for a profitable Bitcoin price is currently 6,100 USD, according to CoinShares. At the current Bitcoin price, the company assumes that the entire mining industry is profitable on average.

Even with relatively expensive electricity costs (>0.05 USD/kWh), a return on investment (ROI) can currently be achieved. For relatively low electricity costs, the use of old hardware is still profitable, while more expensive electricity costs require newer miners.

bitcoin mining cost

Source: https://coinsharesgroup.com/assets/resources/Research/bitcoin-mining-network-december-2019.pdf

CoinShares also estimates that the current average cash flow break-even was around $0.04/kWh, with an additional 15% for cooling and other operating costs of around $3,900. However, they warned that their model is based on hashrate rather than mining difficulty, which means that the model tends to overestimate ROI costs in times of hashrate growth and underestimate ROI costs in times of falling hashrate.

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Bitcoin is “green”

Furthermore, CoinShares has determined that the total power consumption of the entire Bitcoin mining industry is about 6.7 GW. According to the report, this represents a 43% increase over the previous report (June 2019). On an annual basis, CoinShares estimates that the network accounts for about 61 TWh and compared it with the global aluminium smelting industry, which consumes about 900 TWh.

It is again worth repeating here that as a general principle, the Bitcoin mining network will consume as much electricity as the market is willing to sell it in return for the total value of the block reward (new coins plus fees), minus a competitive margin.

Regarding the penetration of the market with “green energy”, the report estimates that 73 percent comes from renewable energy, which is four times the global average and slightly below the value of the previous report. The report attributes this to the fact that BTC mining takes place largely in regions where cheap hydropower is available. However, the report also noted an increased movement into coal-dominated regions such as Kazakhstan.

The full report can be found here.

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About Author

Jake Simmons has been a crypto enthusiast since 2016, and since hearing about Bitcoin and blockchain technology, he's been involved with the subject every day. Beyond cryptocurrencies, Jake studied computer science and worked for 2 years for a startup in the blockchain sector. At CNF he is responsible for technical issues. His goal is to make the world aware of cryptocurrencies in a simple and understandable way.

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