Bitcoin Mining – The security engine behind the Bitcoin blockchain

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  • June 16, 2020
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Executive Summary

On May 11th 2020, Bitcoin went through its third halving. Right before the halving, Bitcoin’s hashrate was near its all time high levels of 136 Eh/s. Industry experts estimated that the cost of mining a bitcoin post halving would be $12000-$15000. But what we have observed is that it has become relatively cheaper to mine Bitcoin post halving due to: The difficulty drop and availability of cheaper electricity in Sichuan, China due to the rainy season.

 

 

 

 

 

 

 

 

 

 

The difficulty drop 

In Bitcoin mining, the revenue earned is dependent on the Bitcoin difficulty. Lower the difficulty, higher the revenue: Thus, lower the breakeven price. Right before the halving, the difficulty was at 16,104,807,485,529 which dropped subsequently by 6% and then by 9.29%. This difficulty drop has made it economical for certain miners to mine Bitcoin with a higher profit margin.

Onset of monsoon in China 

Chinese miners based in Sichuan, China can get access to cheap electricity specially during the monsoon which generally onsets in May. This electricity cost can be as low as $0.035-0.04 per kilo-watt hour. This is possible due to the abundance of hydroelectric power-plants in the region. The large mining operators can negotiate the prices down even further due to scalability.

The Resurgence of S9’s 

Due to the low break-even point, the S9 miners which had become redundant due to the higher difficulty previously, got to live a second life, especially in regions with low electricity costs.

The widespread availability of these S9 miners on the second-hand market also contributed to their resurgence. With the breakeven point at $8800 post the difficulty drop for these S9 miners and the above $9000 price for Bitcoin, it became profitable for miners with access to cheap electricity to mine Bitcoin using these S9 miners once again.

Although this second life might be short-lived for these S9 miners as the difficulty is expected to rise by 15% on June 26. This will take the breakeven point to $10178 for the S9 miners in the Sichuan region.  Before this rise in difficulty, the breakeven point was $8800 for these S9 miners.

The breakeven price for different miners based on current difficulty can be calculated using the Kintaro Capital Mining Calculator here.

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