Mining Economics
Understanding the economics of Bitcoin mining is essential for anyone considering participating in the network. This page covers the revenue sources, cost factors, and profitability calculations that determine whether mining is financially viable.
Block Rewards
The primary revenue source for miners is the block reward, which consists of two components:
| Component | Description | Current Value |
|---|---|---|
| Block Subsidy | New bitcoin created with each block | 3.125 BTC |
| Transaction Fees | Sum of fees from included transactions | 0.1-1+ BTC |
- Current Reward: 3.125 BTC per block (after 2024 halving)
- Next Halving: ~2028 (reward will be 1.5625 BTC)
- Total Reward: Block subsidy + transaction fees
Cost Analysis
Electricity Costs
Electricity is typically the largest ongoing cost for miners:
- Power Consumption: Varies by hardware (modern ASICs: 3,000-3,500W)
- Cost Calculation: Power (kW) × Hours × Electricity rate ($/kWh)
- Consideration: Mining profitability depends heavily on electricity costs
- Regional Variation: Electricity rates vary from $0.02 to $0.30+ per kWh
Hardware Costs
- ASIC Purchase: $2,000–$15,000+ per unit
- Depreciation: Hardware loses value as newer, more efficient models release
- Lifespan: Typically 2-4 years of competitive operation
- Maintenance: Fans, power supplies may need replacement
Other Costs
- Cooling: Air conditioning or immersion cooling systems
- Facility: Rent, construction, or space allocation
- Internet: Reliable, low-latency connection
- Personnel: Monitoring and maintenance staff (for larger operations)
Profitability Calculation
Mining profitability depends on several factors. Here's how to calculate expected returns:
Mining Profitability Factors
Network Hash Rate
- Current: ~700 EH/s (exahashes per second)
- Trend: Generally increasing over time
- Impact: Higher network hash rate means smaller share of rewards
Difficulty Adjustment
- Frequency: Every 2016 blocks (~2 weeks)
- Purpose: Maintains ~10 minute block times
- Effect: Adjusts to network hash rate changes
- See Also: Difficulty Adjustment for detailed explanation
Block Rewards
- Halving Schedule: Every 210,000 blocks (~4 years)
- Current: 3.125 BTC per block
- Future: Will decrease to 0 by ~2140
Transaction Fees
- Variable: Depends on network congestion
- Current Average: 0.1-1+ BTC per block
- Future: Will become primary miner income as subsidies decrease
Pool Mining Economics
How Pool Mining Works
- Miners contribute hash power to pool
- Pool finds blocks collectively
- Rewards distributed based on contribution
- More consistent payouts than solo mining
Pool Fees
- Typical Fee: 1-2% of rewards
- Payout Threshold: Minimum amount before payout
- Payment Frequency: Daily or weekly
Payout Schemes
| Scheme | Description | Risk |
|---|---|---|
| PPS | Pay Per Share - fixed payment per valid share | Pool bears variance |
| FPPS | Full PPS - includes estimated transaction fees | Pool bears variance |
| PPLNS | Pay Per Last N Shares - proportional when blocks found | Miner bears variance |
| PROP | Proportional - divide rewards by shares since last block | Miner bears variance |
See Mining Pools for detailed information on pool operations.
Individual vs Pool Mining
Solo Mining
- Probability: Extremely low for individual miners
- Time to Block: Could take years or never happen
- Reward: Full block reward when successful
- Best For: Very large operations only
Pool Mining
- Consistent Payouts: Small but regular rewards
- Reduced Variance: Share rewards with other miners
- Lower Barrier: Don't need massive hash rate
- Best For: Most miners
Related Topics
- Bitcoin Mining - Mining architecture and concepts
- Proof-of-Work Mechanism - How mining works
- Difficulty Adjustment - How difficulty affects profitability
- Mining Pools - Pool operations and payout schemes
- Hardware Evolution - Mining hardware efficiency