mining revenue rose $8 million, and mining difficulty spiked 5% in January 2023 as rising Bitcoin prices incentivized greater deployment of mining hardware
Mining difficulty rose about 4.7% from two weeks ago to almost 40 trillion at press time, while revenues grew from around $15.3 million on Jan. 1, 2023, at about 24 million dollars at the time of printing.
Revenue Driven by Bitcoin Rally
Bitcoin’s 41% surge since the start of 2023 significantly increases the value of the block reward miners receive, incentivizing them to deploy more resources.
Bitcoin miners are rewarded with Bitcoin by expending computing power to guess the correct hash of a block of Bitcoin transactions. Miners use special computers called asics to vary a value called nonce to produce a hash value below a preset number.
The bitcoin algorithm adjusts the mining difficulty once all blocks 2016 or almost every other week. It makes it more difficult if the average time to guess the correct hashes for the previous 2016 transaction blocks is less than ten minutes. A shorter audit time is generally equivalent to increased computing power on the network.
To keep the block time to ten minutes, the algorithm increases the difficulty, which makes it more difficult for new computers to guess the correct hash. On the other hand, if less machines are online, the algorithm raises the hash threshold.
At the time of the press, the difficulty was approximately $39 trillion, compared to approximately $37.5 trillion two weeks ago.
A higher difficulty is a lower hash level, requiring more hash assumptions per second.
At the time of the press, the hash rate of the Bitcoin network was about 290 exahashes-by-second.
The mining industry is expected to become stronger in 2023: CoinShares.
The 2022 bear market saw miners with high levels of debt struggle to remain profitable.
New York-based mining firm Greenidge sold machines to the New York Digital Currency Group as part of a debt restructuring plan. Core Scientific switched off a contingent of mining machines it operated on behalf of collapsed lender Celsius after the lender failed to pay for rising energy costs. Iris Energy in Sydney decided to close a facility that was having a hard time providing a $108 million loan. At the same time, argo blockchain recently sold its helio installation in Dickens County, Texas, to crypto financial services digital galaxy enterprise. Stronghold Digital Mining recently extinguished about $18 million in amended notes in exchange for Class C amended shares.
CoinShares’ Matthew Kimmel suggested that while 2022 was brutal for most mining companies, 2023 will continue to flush out insolvent outfits and consolidate mining operations.
A stable Bitcoin price led by emptying companies built on airy foundations of reckless debt and risk management will mean that mining companies can better plan, he predicted.
Miners with better cash flow can invest in more efficient mining machines, reducing their energy usage per hashing operation since the profitability of a mining operation depends heavily on the cost of electricity.
Adequate debt eradication and a reduction in overhead would also help businesses store Bitcoin for 2024, when the number of Bitcoin attributed to miners decreases to 6.25 BTC per hash correctly guessed.