Key Takeaways: After the halving, Bitcoin’s hash rate (30-day moving average) has fallen 7% from its all-time high of 626 EH/s to 580 EH/s currently. OKX’s massive UTXO consolidation brought a brief boost to transaction fee revenue, with miners earning $38 million in transaction fees in 3 days Toronto-based mining company Bitfarms has made impressive progress in mining efficiency, reducing incremental energy consumption from 35 J/TH to 27 J/TH by 2024. At the peak of the 2021 bull run, the Antminer S19 traded at as high as $100/TH, but is now trading as low as $2.5/TH on the secondary market.
Introduction This week’s State of the Network report takes another look at the Bitcoin mining landscape, continuing our series of quarterly updates on the state of proof-of-work stakeholders. Since the Bitcoin halving in April, mining profits have been under pressure due to stagnant Bitcoin prices and a depressed fee market, although short periods of on-chain congestion have provided some relief. Many miners are diversifying beyond pure mining and repositioning themselves as general infrastructure providers in an attempt to secure hosting contracts for energy-intensive artificial intelligence applications. At the same time, chip efficiency improvements continue unabated, forcing miners to consider whether to continue using aging ASIC hardware or to make a full-scale upgrade. In this report, we’ll delve into each of these factors to assess the health of the mining industry beyond Bitcoin’s price performance. Mine farm integration At first glance, the second quarter of 2024 was a relatively profitable period for Bitcoin miners. The quarter ranked fifth by total dollar revenue out of the 18 quarters since January 2020, with miners earning a total of $3.77 billion through block subsidies and transaction fees. Of course, these gains were front-loaded due to the halving, with April alone accounting for nearly half of the quarter’s revenue. With the Bitcoin block reward reduced from 6.25 BTC to 3.125 BTC on April 20, and the popularity of the “Rune” token fading in the following weeks, May and June were even tougher months for miners. As a result, Bitcoin’s hashrate is showing signs of miners pulling back — the 30-day moving average of hashrate at 580 EH/s is down 7% from the all-time high of 6.26 EH/s. Source: Coin Metrics Network Data Pro Although overall revenue momentum has weakened, the unexpected increase in on-chain traffic has provided miners with some respite. In early June, the Bitcoin memory pool was crowded with transactions that paid high fees, and by noon on June 7, the average hourly transaction fee was as high as $945. This congestion period significantly increased mining revenue, with the price of computing power (US dollar revenue per TH/s per day) soaring to $0.09, and fees contributing more than 42% of revenue. While fee spikes are usually associated with token protocols like Ordinals and Runes, the recent boost in mining revenue was brought about by the internal operations of a single centralized exchange. OKX (the fourth largest exchange by Bitcoin spot trading volume) conducted a series of large-scale "UTXO mergers" to clean up the books by combining fragmented Bitcoin shares into larger, more compact denominations. Since Bitcoin transaction fees are determined by the block space they consume, transactions involving many UTXOs are more expensive to transfer, and "merged" UTXOs can unlock payments with a lighter, more cost-effective on-chain footprint. The UTXO consolidation process is similar to dumping a bunch of loose change into a change machine and getting a $20 bill in exchange. However, just like a change machine, this service comes at a cost. While daily fee revenue is typically around $1-2 million, in the 3 days after OKX performed UTXO consolidation, miners received nearly $38 million in revenue. In hindsight, OKX could have performed their cleanup more efficiently, as they paid a huge premium for fast settlement - but miners are certainly not complaining in the face of sluggish transaction queues and record low hashrate prices. The importance of infrastructure Since the Bitcoin halving, the share prices of most publicly traded mining companies have moved sideways along with Bitcoin. Shares of the three largest miners—Marathon Digital (MARA), Clean Spark (CLSK), and Riot Platforms (RIOT)—all failed to outperform Bitcoin in the second quarter, with only Marathon managing to achieve a small relative return. So far, the dark horses in the Bitcoin mining race have performed the best, with Core Scientific (CORZ), Iris Energy (IREN), and TeraWulf (WULF) all outperforming their competitors by double digits. Coincidentally, these companies have all been heavily capitalizing on the AI craze, positioning themselves as energy and infrastructure providers for a wider range of computing applications. In June, Core Scientific signed a series of multibillion-dollar contracts with “AI supercomputing company” CoreWeave, agreeing to provide hundreds of megawatts of power capacity to host the company’s high-performance computing (HPC) hardware. Shortly after, CoreWeave submitted an “unsolicited proposal” to Core Scientific to acquire its entire business, but Core Scientific rejected the proposal, citing its “growth prospects” and “value creation potential.” IREN and WULF also highlighted their unique positioning in hosting HPC infrastructure, which makes them attractive partners (and possible acquisition targets) for AI companies that are increasingly facing energy constraints. For other miners, share price movements are driven primarily by mergers and acquisitions within the industry. While small-cap miner GRIID Infrastructure (GRDI) has lagged behind its peers since going public this year, CleanSpark announced its acquisition of the company in June, claiming the move would increase their power capacity by 400 megawatts in two years. In May, Riot Platforms disclosed its 9.25% stake in Bitfarms (BITF), a slightly smaller miner that was suffering from corporate governance issues. Riot offered to acquire all of Bitfarms for approximately $950 million, claiming the acquisition would create the "world's largest publicly traded Bitcoin mining company" by the end of the year. Bitfarms quickly rejected the offer, fending off Riot's hostile takeover by issuing a "poison pill" plan designed to dilute the shares of entities seeking to acquire it on the open market. Riot’s motivation for acquiring Bitfarms can be attributed to multiple factors, but one notable one is their dramatic increase in efficiency. Historically, Bitfarms has utilized low-cost hydroelectric power and used older generation ASIC chips rather than upgrading to cutting-edge hardware. This caused them to lag behind competitors in metrics such as mining efficiency, which is measured in “Joules per terahash” (J/TH), representing the incremental energy consumed to produce computing power. However, Bitfarms recently implemented a comprehensive mining machine refresh, purchasing 16 EH/s Antminer T21s (19 J/TH). In 2024, Bitfarms’ average mining farm efficiency increased from 35 J/TH to 27 J/TH, surpassing Riot’s stagnant efficiency of 27.7 J/TH. Bitfarms aren’t just making impressive gains in average farm efficiency. Iris Energy has reduced average energy consumption by 15% to 25 J/TH over the past six months, and TeraWulf has achieved an 11% efficiency improvement to 24.6 J/TH over the same period. Core Scientific, fresh out of Chapter 11 bankruptcy, currently leads the pack with 24.23 J/TH, just ahead of current efficiency leader Marathon Digital at 24.5 J/TH. As the race to optimize operations shrinks to decimal precision, miners are now looking to the next generation of ASIC chips to get ahead of the competition. The ASIC Era After more than a decade of chip manufacturing innovation, Bitcoin mining application-specific integrated circuits (ASICs) have achieved unprecedented efficiency gains. The first commercial ASIC chip, the Canaan Avalon 1, was released in January 2013 with a hash rate of just 0.06 TH/s. It consumed 620 watts of power, which equated to an efficiency of 10,333 J/TH. At the time, this was a big leap in raw hash rate output, as total network hash rate was just 22 TH/s. Soon after the Avalon 1 was released, rival manufacturers entered the market aggressively, and continued technological advances increased hash rate by 14,000 times in two years. Efficiency gains have tapered off from the early days of exponential growth, but manufacturers are still aggressively reducing the energy required to produce a unit of hashrate. In June, Bitmain announced their latest Antminer S21 XP series, a water-cooled version that has a hashrate of 473 TH/s and an efficiency of 12 J/TH. While Bitmain remains the industry giant, upstarts like Bitdeer — led by former Bitmain CEO Jihan Wu — have announced ambitious plans to produce 5 J/TH ASIC chips by the second quarter of 2025. As Bitcoin miners begin to phase out their existing hardware fleets in favor of more efficient models, ASIC prices have plummeted. While nominal prices vary depending on hardware specifications, ASIC traders typically quote them in dollars per terahash ($/TH), providing an easily comparable metric for measuring the premiums of various models. The 2021 bull run (coupled with China’s mining ban) contributed to a period of hyper-profitability in BTC mining. This led to high premiums for Antminer S19 models (90-110 TH/s), with prices remaining high around $90-100/TH throughout the year. However, in 2022, plummeting revenues put significant pressure on ASIC premiums, with S19 prices falling by more than 80%. Post-halving, secondary markets such as Kaboomracks continue to capitulate, with the poorly performing S19 models trading as low as $2.5/TH in June. Despite losing the shine of the new generation, ASIC fingerprinting technology shows that the S19 series still contributes more than 50% of the hash rate, indicating that they are being redeployed to lower-cost sites rather than being retired entirely. Even the 2016 Antminer S9 has maintained a place at the edge of the grid, still reliably turning waste energy into electronic cash nearly a decade after its debut. While the most efficient operators will undoubtedly choose to replace their miners with the latest models, the rugged and highly industrialized form factor of modern Bitcoin mining ASICs ensures that almost every machine will eventually find its place in the proof-of-work ecosystem. in conclusion Bitcoin’s fifth era is likely to be characterized by consolidation, with deep-pocketed miners acquiring the assets of less efficient operators. The AI industry also envies the industry’s unique energy infrastructure, and many publicly traded miners have successfully adopted more general data center strategies. Others remain focused on Bitcoin, viewing HPC juggling as a temporary distraction. Regardless, to survive the onslaught of efficiency gains and competitive pressures, all miners must look to the future, and the long-term trajectory of BTC prices remains an unpredictable input to a highly capital-intensive business model. Network Data Insights Summary indicators
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