Hashrate Fantasy: Bitcoin Hashrate Forecast for 2020

The halving of Bitcoin block rewards has led to a sharp drop in mining revenue, with the total Bitcoin network computing power dropping by about 20EH/s in a week. According to expectations , after two difficulty adjustments, Bitcoin mining revenue will rebound significantly in the short term, and with the arrival of the flood season, the total Bitcoin network computing power will inevitably see a significant increase .

With the launch of the latest generation of mining machines with a unit power consumption of 40W/T, and the continued shipment of mining machines with a unit power consumption of 45-65W/T, it is not difficult to imagine that the computing power of the entire Bitcoin network will reach a new peak in 2020.

Many miners who have already entered the market or are still waiting and watching are wondering what the computing power will be this year. The author has summarized the data of recent years and subjectively depicted the trend of computing power in the next few months. It is not for reference, but only to provide an idea .

01 Changes in Bitcoin network computing power during the flood season

Figure 1 Changes in computing power in the last two years (data source: https://www.coinwarz.com/)

During the flood season in 2018 (from early June to late October), the computing power of the entire Bitcoin network increased from 37EH/s to 53EH/s, a 43% increase in computing power. The number of newly added mining machines in the entire network exceeded 1 million (the average computing power of the main mining machines was around 14TH/s).

At this time, the main mining equipment in the entire network includes Bitmain's S9 series mining machines, T9; MicroBT's M3; Canaan Creative's A741, A841; Ebang International's E9, E10; Innosilicon's T2 and other models of mining machines. The average energy consumption ratio of the mining machine is about 95W/T .

Figure 2 Changes in Bitcoin computing power during the flood season in 2018 (data from: https://www.coinwarz.com/)

During the flood season in 2019 , the computing power of the entire Bitcoin network increased from 50EH/s to 93EH/s, an increase of 86%, and the number of new mining machines in the entire network was about 1 million .

At this time, the main mining equipment in the entire network includes the S9 and other mining machines with better performance among the previous generation of mining machines (after optimization, the average power consumption of the mining machine can reach 85W/T), and the new generation of mining machines, including Bitmain's S11, S15, T15; MicroBT's M10 series mining machines; Canaan Creative's A921; Ebang International's E11; Innosilicon's T3 and other models. The average energy consumption ratio of the new generation of mining machines is about 60W/T .

Figure 3 Changes in Bitcoin computing power during the flood season in 2019 (data from: https://www.coinwarz.com/)

Thanks to the emergence of higher-performance mining machines, the computing power increase during the flood season in 2019 far exceeded that during the flood season in 2018, but the shipment volume of mining machines was not much different.

On the whole, in the short term, before there are revolutionary technological breakthroughs, the production capacity of Bitcoin mining machines during the flood season is roughly estimated to be around 1 million units , limited by upstream and downstream factors including chip production capacity, supply of components such as power supplies and wires, and assembly production capacity of mining machine foundries.

02 Current distribution of Bitcoin mining machines (estimated)

On May 11, 2020, before Bitcoin completed its halving, the total network computing power reached a historical peak of 120EH/s. Mining machines with an energy consumption ratio of 85W/T still maintained a certain mining income. Mining machines with an energy consumption ratio of 60W/T , which were the main force in mining in 2019, and mining machines with an average energy consumption ratio of 50W/T represented by S17, T17, M20, and M21, are the main equipment providing computing power for the Bitcoin network at this time.

According to an inaccurate estimate, during the peak period, the computing power of various mining machines is as follows:

Figure 4: Distribution of various mining machines before halving (data source: based on the author’s inaccurate estimate)

According to the official websites of various mining machine manufacturers, during the flood season in 2020 , the main mining machines shipped were a batch of mining machines with an average energy consumption ratio of 50W/T , mainly represented by S17, S17e, M31S, etc.

The latest generation of mining machines with energy consumption ratios of 40W/T or even 30W/T have been recently launched and are affected by factors such as chip production capacity constraints and assembly line running-in, so the shipment volume should be relatively limited .

As for the earlier generation of mining machines with an energy consumption ratio of 60W/T , since they still have mining income, mining machine manufacturers may still ship a small amount of them for considerations such as sharing the mining machine costs.

03 Computing power during the flood season in 2020 (estimated)

After the halving, the Bitcoin mining revenue dropped sharply, and a large number of 85W/T energy consumption ratio mining machines chose to shut down because the mining revenue did not cover the electricity expenses. As of now, the total network computing power has stabilized at 95EH/s-100EH/s . The total network computing power has dropped by about 20EH/s, and the main decline in computing power comes from 85W/T energy consumption ratio mining machines.

Figure 5 Current actual computing power of the entire Bitcoin network (data source: https://miningpoolstats.stream/)

If the hashrate remains stable at the current level, it is estimated that the difficulty will continue to decrease by 10%-15% during the next Bitcoin mining difficulty adjustment, and the mining revenue will increase by 11%-17%. In addition, the flood season has arrived, and it can be expected that within the next one or two difficulty cycles , if the Bitcoin price does not plummet (stabilizes above 8500USDT), the hashrate of the entire network will return to the situation before the halving .

Afterwards , as we enter the flood season, various types of mining machines will be shipped and put on the shelves in large quantities, and computing power will continue to surge.

When the total network computing power reaches 135EH/s , the mining income of an 85W/T mining machine under abundant hydropower will not offset the electricity expenses (reference electricity price 0.23 yuan/kWh, reference currency price 9000USDT).

Figure 6 Income and expenditure of various mining machines (data source: calculated based on the Bitcoin network)

Notes: ① The above table shows the mining income and electricity expenditure of various types of mining machines with a computing power of 1PH/s when the computing power reaches 135EH/s and the mining difficulty is adjusted; ② The mining income is estimated based on the PPS+ income model. After the block reward is halved, the proportion of the handling fee reward in the total mining income is relatively high and cannot be ignored. Here, the proportion of the handling fee reward is calculated as 11%; ③ The Bitcoin price is calculated at 1BTC=9000USDT, and the RMB to USD exchange rate is calculated at 1USD=7CNY; ④ The electricity price is calculated at 0.23 yuan/kWh.

At this time, the total network's new computing power is about 15EH/s , and it is estimated that more than 200,000 mining machines will be needed to meet the demand. According to the computing power growth and mining machine shipments in 2018 and 2019, this will take about one month . That is, by the end of July and the beginning of August, 85W/T mining machines will once again face a shutdown wave .

After the total network computing power reaches 135EH/s , a batch of 85W/T computing power will be cleared for each new batch of mining machines. However, in the short term, this is not done synchronously. Since the difficulty of Bitcoin mining is adjusted every 2016 blocks (about two weeks), this computing power competition will continue with most of the 85W/T mining machines being turned off (difficulty increases) and then turned on (difficulty decreases) until the total computing power of the mining machines with an average energy consumption ratio of 60W/T, 50W/T and 40W/T reaches 135EH/s . At this time, all 85W/T energy consumption ratio mining machines will be cleared out of the Bitcoin computing power market.

At this time, the total network's new computing power is nearly 40EH/s , and it is estimated that nearly 600,000 mining machines will be needed to achieve this computing power. According to the historical delivery speed of mining machine manufacturers, this will take about 3 to 5 months (affected by the epidemic, the actual delivery speed may be slower), that is, if the coin price does not plummet (falling below 8500USDT), it is expected that in October-December, the 85W/T energy consumption ratio mining machine will be completely cleared out of the computing power market.

Afterwards, the electricity cost accounts for less than 60% of the mining income of mining machines with an average energy consumption ratio of 60W/T, 50W/T and 40W/T, and the mining income is still relatively high.

In order to eliminate mining machines with an average energy consumption ratio of 60W/T , the computing power of the entire network needs to reach 190EH/s . The Bitcoin network needs to add another 55EH/s of computing power, which requires approximately 800,000 new mining machines. According to optimistic estimates, it will take 4 months to complete the shipment, which is already past the flood season .

Figure 7: Revenue and expenditure of various mining machines when the 60W/T mining machine is shut down (data source: calculated based on the Bitcoin network)

Notes: ① The above table shows the mining income and electricity expenditure of various types of mining machines with a computing power of 1PH/s when the 60W/T mining machine is shut down and the computing power reaches 190EH/s. When the mining difficulty is adjusted, the mining income and electricity cost of various types of mining machines with a computing power of 1PH/s are as follows; ② ③ ④ Same as the notes in Figure 6.

Therefore, it can be concluded that mining machines with an average energy consumption ratio of 60W/T and those with lower energy consumption ratios will not quit mining during the flood season in 2020. There is only one factor that limits the peak computing power during the flood season in 2020, which is the shipping speed of mining machine manufacturers .

According to the estimate of 1 million units shipped during the flood season, when the price of the currency does not fluctuate violently (stable at 8500USDT-9500USDT), the total network computing power in the flood season of 2020 will reach a maximum of 150EH/s: by the end of July, the total network computing power will increase to 135EH/s; then the total network computing power will fluctuate in the range of 105EH/s-145EH/s, until early October, when the 85W/T mining machine was completely withdrawn, the computing power began to rise steadily, reaching a maximum of 150EH/s, and the flood season ended . There will be another round of computing power fluctuations in the future.

Fantasy 1: The coin price rises sharply , and the 85W/T mining machines are restarted. When the coin price exceeds 11,500USDT, all 85W/T mining machines will have a net profit, and the computing power of the entire network will soar to 190EH/s.

Fantasy 2: The price of the currency plummets , and the 85W/T mining machines are cleared out in advance. The computing power of the entire network will experience a decline first and then an increase, and finally steadily increase to 150EH/s. Subsequently, the price of the currency continues to decline, and the price of the currency falls below 7000USDT. Some 60W/T mining machines begin to shut down. When the price of the currency continues to decline, the Bitcoin network dynamically adjusts the mining difficulty to increase mining income to maintain the computing power of the entire network. When the price of the currency falls below 5000USDT, the 60W/T mining machines will be slaughtered and all will be cleared out of the Bitcoin computing power market.