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What Is The Energy Efficiency, Difficulty and Profitability Of Bitcoin Mining?

October 12, 2022
min. read

Bitcoin mining profitability depends on its rate, network difficulty, the cost of miners and electricity. If mining is unprofitable, miners are turned off, because if you leave them on, they will generate a loss. It's like if your ice cream shop is closed, and you stubbornly keep empty fridges turned on and continue to pay inflated utility bills.

The price of miners is a very important parameter for evaluating a business, especially for large companies, since idle miners represent money that no longer works. If you look at the chart, it is obvious that the price of miners in general follows the Bitcoin exchange rate.

according to Hashrateindex:

The lower the ratio of the miner's power consumption to the hashrate's terahash, the more expensive it is. For example, the chart shows that the price of a miner with a parameter lower than 38 J/TH (kW/TH) is almost 2 times higher than a miner with a parameter of at least 68 J/TH. Obviously, in the first case, the miner's break-even point is much lower, which means that in unfavorable market conditions, such a miner will be one of the last to be turned off, continuing to generate profit to the end.

Thus, the energy efficiency parameter is the most critical for most miner models. Based on it, you can assess profitability and understand whether mining is worth it in the current market conditions.

Let's consider a typical variant of creating a mining farm based on ASIC manufactured by the well-known Bitmain company, the Antminer S19 PRO. For simplicity, we will assume that the farm has one miner. So, Antminer S19 PRO is an advanced ASIC with a hashrate of 110 TH/s and 3250 watts of power. The largest mining companies successfully operate on this equipment, and Bitmain is a recognized leader among mining companies.

The efficiency of this device is 29.55 J/TH. Based on this, you can estimate the possible income. Taking into account the electricity cost, you can also estimate profitability and break-even point. With an average price per 1 kW of $0.15, we get the following result:

As you can see, in about May-November 2020, as well as starting in June 2022, that is, when Bitcoin was fluctuating around $10,000 and $20,000, respectively, even such an advanced miner as S19 PRO could not provide positive returns.

This example clearly shows what impact network difficulty can have on Bitcoin mining cost. Between May and November 2020, the difficulty did not exceed 20T, and starting in June 2022 it no longer fell below 27T, currently reaching 32T (32 trillion hash function calculations).

according to

On October 10, the difficulty reached 35.61T

This is due to the fact that despite the fall of the Bitcoin rate, large companies continue to increase their mining capacity by inertia, because this is the only way they work. In one of the following articles, we will analyze this case in more detail using the example of certain experts’ apocalyptic forecasts.

As the difficulty increases, inefficient miners will gradually become unprofitable and be turned off, but large companies will work to the bitter end, because in the current situation, they are much more concerned with cash flow to service mining hardware loans than profit.

Sooner or later, a certain equilibrium moment will come when large capital “capitulates” to market realities, and the unrestrained build-up of difficulty will stop. By that time, only the most efficient small debt-free companies, which managed to maintain profitability thanks to access to cheaper electricity, will remain on the market.

Below is the same chart for the price of $0.06 per kW. As you can see, profitability has never gone into the red in this case.

Use the calculator, to evaluate how much you can earn on the Antminer S19 PRO miner over a year at a price of $0.06/kW:

The break-even point for this model is the value of 0.096 $/kW.

0.139 BTC or $1022 of cumulative profit from Bitcoin mining is expected for the year.

Let's remember that electricity cost is a variable value, and it can fluctuate during the day. With a skillful approach, advanced mining companies can manage mining profitability by turning off some inefficient miners during peak loads on the power grid, when the price of electricity goes through the roof. Thus, it is possible not only to reduce costs, but even to increase profitability, which is clearly demonstrated by the Minto project.

So in the monthly report for August, Minto gives the calculated result with a hypothetical 100% uptime of mining hardware, where mining 7.585 BTC costs almost $140k, which brings in about $28k in net profit. At the same time, in reality, the 65% uptime technology used by Minto, allows you to get about $40k of net profit, since the 4.295 BTC extracted in this case costs only $94.57k in electricity costs. This technology was proposed by the Minto team in August and was supported by the community through a vote. The September results are even more eloquent:

according to Minto August and September reports

Minto offers $BTCMT hashrate tokens at the rate of 100 BTCMT = 1 TH/s; staking them brings daily income in Bitcoins and essentially replaces mining for private players. Unlike the BTCST (Binance) and Poolin (MARS) projects that have already stopped all payouts, Minto continues to work and has a tangible safety margin.

Thus, the crucial factor in mining farm viability is not the total number of terahashes, which would seem to provide the farm with the maximum profit on the principle of “the more, the better,” but access to inexpensive electricity,  miners' overall energy efficiency and competent management of their profitability. It is obvious that two questions - who mined the most Bitcoins, and who earned the most, can’t have the same answer considering all of the above, since each company has its own Bitcoin and terahash costs, and these values vary greatly.

As a strong market participant, Minto invites everyone who believes in Bitcoin and would like to mine it to join the project. BTCMT tokens are a reliable tool for accumulating and preserving mining power that will work for you 24/7 in any market conditions!

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