The miners’ survival after halving compared to the hash rate

The market for selling hash rates in exchange for Bitcoin (BTC) has seen astonishing growth since the last halving. Today there is almost 100 times the level of competition, just like four years ago, ie up to 125 exahashes out of 1.4 exahashes.

After the last halving in 2016, the 16nm chips were the first to hit the market, bringing 14 terahashes per second (T / s) to 100 watts per terahash. Since then, the 10 nm, 7 nm and now 5 nm chips have been used, with over 100 T / s consuming only 30 W / T. Advances in chip design and manufacture have more than doubled the efficiency of ASICs and are almost 100 times more powerful. While 5nm chips are just beginning to join the network, the 7nm chip market has been growing for a few years, forcing users of 16nm and 10nm chips to find or get cheaper power. Mining companies have branched internationally across the energy markets and are looking for cheaper electricity to increase profit margins and extend the life of their machines. Mining is a great survival game.

There has been a lot of discussion recently about how the next halving of Bitcoin (less than two weeks away!) Will affect the mining industry in the coming months. There is little doubt among researchers and industry experts that the hash will decrease significantly if the block reward is halved. Blockware Solutions recently published a report that argues this Halving will reduce selling pressure as older devices and higher electricity costs drive out inefficient competitors.

The miners’ survival after halving compared to the hash rate
The miners’ survival after halving compared to the hash rate

The question is how much hashrate will be offline. As a pool operator, we do not get any information about the miners’ electricity costs, so we cannot know exactly what that number will be. However, by breaking down the hash distribution, we can determine which miners are at the highest risk of being closed.

At the bottom, the lower quartile of the total hashrate is divided into two terahash intervals. Each section of the pie chart represents the percentages of total production for each interval in the lower quartile.

We primarily consider the lowest quartile of the network hashrate, as this is the area with the highest risk in which the profit margins of the miners are the lowest. The 0 to 25 T / s range represents most 16nm and 10nm chips, many of which are likely to give up once the block reward is cut in half. The most popular mining machine sold in the past four years was the Bitmain S9. There are many versions of all of them fall between 12-22 T / s. The S9 standard produces 13.5 T / s, which probably indicates that most miners are in the 12 to 14 T / s range.

We estimate that miners in this area account for approximately 15% to 30% of the total Bitcoin network hashrate.. Although we assume that most of them will go out after halving, some are likely to have electricity that is cheap enough to survive in the near future.

There is three variables changing miners have to compare when calculating profitability: income, costs and difficulties. Bitcoin price and block reward set the upper limit of income. Halving the block reward has the same effect on a miner’s income as halving the Bitcoin price in U.S. dollars. The recent price hike since it hit a yearly low could lead to higher profit margins in the short term if prices continue to rise. However, if the price fell, inefficient miners would be traveling faster.

By comparing the equilibrium prices of miners in the lower quartile, we can see at what prices the oldest miners will no longer be profitable. To compare the equilibrium prices, we have to take into account the current difficulty and the current price. In the table below, we assume that the price of Bitcoin is $ 7,000 at the current difficulty.

The maximum one of them can pay for electricity and stay profitable after halving is $ 0.034 per kWh. Those who drive between 0 and 10 T / s will all leave unless they have practically free electricity and no other overhead. If we take the areas with the highest percentages of hashrates between 10 and 16 T / s, only the Antminer S9K barely reaches 3 cents per kWh. With 46% This area accounts for almost half of the total mining hash performance in this area. Most of them have to be mined below $ 0.02 per kWh to remain profitable after halving. There are very few places that can offer such cheap electricity. Even the prices for hydropower plants in Szechuan, China, during the rainy season are far above these compensation costs. Even if some of these miners could survive on less than $ 0.02 of electricity, their margins would be so small that if the difficulty increased, they would ultimately be removed to make such tiny profits. Most of the hashrates in this area are likely to be lost from the start.

Some of the 16-26 T / min miners may be profitable a little longer after the difficulty has corrected downwith more equilibrium prices between 0.03 and 0.035 cents per kWh. However, these will again be very narrow margins, which will also cause these miners to become obsolete in the short term. Although there may be some who can continue to work with electricity cheaply enough, we estimate that less than 15% of the lower quartile will remain.

The next and last difficulty adjustment, which is made with a block reward of 12.5 BTC, takes place one week before the halving. (1008 blocks), and the difficulty is expected to increase. We expect the first 1008 blocks to be slowly mined after halving because a large number of unprofitable miners are leaving the network. We estimate that around 30% will come out considering that the first 1008 blocks have the difficulty before halving, but half the reward.

After the first level of difficulty, some older miners may be reactivated. However, as newer, more efficient ASICs go online in the coming months and existing miners find lower electricity prices, older generation miners will inevitably expire. . Many of the older 7nm chips will replace cheap power where the 16nm and 10nm chips will only survive, while the new 5nm chips will benefit from higher power costs and more pressure. There will undoubtedly be a number of fluctuations as the new hashrate pulls the old team out, stabilizes and continues to increase.

The beginning of this mining era offers new miners the opportunity to enter a more stable environment The efficiency of 5 nm chips should remain profitable for the next four years or longer, since we are confronted with Moore’s law on how thin silicon foils can be. This means that newcomers can have a clear idea of ​​what the mining landscape will look like in the next four years.

The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Alejandro De La Torre He firmly believes in the financial freedom that Bitcoin and cryptocurrencies will bring to mankind. He has seven years of experience in the industry. De La Torre is currently Vice President of, a survey on Bitcoin and cryptocurrency mining. Previously, he was Vice President of and Director of Business Development at Blocktrail (acquired by Bitmain).

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