The landscape of Bitcoin mining is changing as the dynamics of operation become more difficult. Network Hashrate Miners are seeing significant changes in profitability despite near-record trading prices for Bitcoin. This development is reducing margins for miners and raising questions about the future dynamics of Bitcoin mining.
Record hashrate, falling revenue
We can assume that miners will receive significant profits. Bitcoin trades around $63,500. In fact, the truth is quite different. The hash rate of the Bitcoin network has reached an incredible 635 exahashes per second (EH/s). This improvement in computer power has made the battle for mining even more difficult.
Hashrate, which measures computing power The time required to conduct a transaction on a proof-of-work blockchain has more than tripled since November 2021, when Bitcoin was priced at roughly the same rate. It averaged 161 EH/s.
Data from the Hashrate Index shows that the “hash price” – the daily earnings per terahash per second (TH/s) – has fallen to its lowest level in five years, amounting to just $51.13 as of July 16. This drop suggests that the cost of extracting a block has increased, so profitability for individual miners has decreased even with Bitcoin’s great market value.
Bitcoin hashrate index. Source: Hashrate Index
Expert views
Industry analysts are weighing in on the current state of bitcoin mining. According to Kurt Wuckert Jr., CEO and creator of bitcoin SV mining pool Gorilla Pool, profitability for miners using the SHA256 blockchain is at a nearly six-year low. Wuckert notes that although some U.S.-based bitcoin mining units are still in operation, their profitability levels have been outweighed by their stock price.
Addressing the audience at Crypto Connect Palm Beach in Miami, Wuckert expressed his concerns about the state of the market and cautioned against investing in blockchain assets or mining equipment in light of the general uncertainty.
He highlighted the complexity created by electricity usage, and explained that the significant power consumption by miners creates the potential for profit through power transfer, which worsens the economics of bitcoin mining.
Centralization concerns
The centralization of mining power raises growing questions within the Bitcoin community. According to data from a Gorilla Pool news release and a June Bitcoin.com analysis, two mining pools, Foundry and Antpool, have emerged as the dominant players responsible for mining 54% of all Bitcoin blocks during the past year.
By pooling their computational capabilities, mining pools let individual miners maximize their chances of extracting blocks effectively. But this approach has resulted in a scenario in which a few powerful companies control a large portion of the network's hashrate. Such centralization compromises Bitcoin's distributed character, increasing the network's vulnerability to potential security risks and governance problems.
the road ahead
For miners, the changing economics of Bitcoin mining creates a difficult and confusing environment. Record-high hashrate and falling hash prices are hurting profits and forcing miners to negotiate in a very competitive market.
Featured image from Pexels, chart from TradingView
