The Year In Review
In 2023, the Bitcoin mining scene faced significant challenges, as indicated by a notable increase in hash rates and mining difficulty. According to Compass Mining’s yearly analysis of the Bitcoin mining business, the worldwide hash rate increased significantly over the past twelve months.
The year started with 266 exahashes per second (EH/s) before the network’s hash rate increased to 542 EH/s by the end of 2023 – a 103% increase. This surge in hash rate was accompanied by an equal rise in mining difficulty, which is an inherent feature of the Bitcoin mining protocol that maintains an average block creation time of 10 minutes.
The increased worldwide hash rates caused a jump in the Bitcoin average difficulty, which began the year at 35 T and reached 72 T on December 31. This surge highlights the evolving nature of the Bitcoin mining ecosystem, as well as the obstacles that miners face, which force them to liquidate some of their BTC holdings to cover operational expenses.
Assessing Bitcoin Mining Hash Rate
Bitcoin mining specialist Anthony Power looked into the tactics used by different miners to keep up with the rising network demands last year. According to Power, Iris Energy started 2023 with a hash rate of 1.7 EH/s but saw a spike to 5.6 EH/s within six months, indicating a 273% gain.
Thus, it is no wonder that Iris Energy intends to double its hash rate in 2024, aiming for more than 11 EH/s. Part of that plan involves expanding its Childress site in Texas to 20 EH/s by year-end and the opportunity to buy an additional 9 EH/s of mining capacity.
Similarly, Marathon Digital’s operating hash rate increased significantly throughout 2023, rising 253% from 7.0 EH/s to 24.7 EH/s. Power underlined Marathon’s ambition to achieve a hash rate of 50 EH/s over the next two years following the acquisition of two mining sites from Generate Capital in January 2024
Furthermore, Power identified significant annual hash rate improvements in 2023 for key players such as Hut 8 (New Hut, 188%), Bitdeer (168%), TeraWulf (150%), Bit Digital (101%) and CleanSpark (53%).
However, Riot Platforms’ hurdles (notably, the harsh cold weather storms) caused it to experience a modest 28% growth in its self-mining operating hash rate in 2023.
Largest Bitcoin Miners
Notwithstanding its period of Chapter 11 insolvency spanning the entire year, Core Scientific emerged as the number one miner among the US-based ones, generating 13,782 BTCs according to on-chain data.
Marathon Digital ranked second with 12,843 BTC mined, while CleanSpark occupied the third position among US miners with 7,391 BTC mined. In contrast, Riot not only fell short of analyst expectations but also generated 6,619 BTC in 2023.
The expert attributed this decrease in output to the energy strategy implemented by the company in Texas. However, a prevalent trend in the mining industry was that nearly all mining operators had to liquidate portions of their monthly mined BTC to cover operational expenditures due to the continued rise in hash rates.
However, Power clarified that Marathon and Hut 8 still managed to retain substantial portions of their Bitcoin reserves despite the harsh operating conditions.
Bitcoin Miners Adjust Costs In Texas
Furthermore, Power highlights Bitcoin miners’ adaptability in modifying their energy consumption to meet the demands of power grids. Texas, known for its abundant and inexpensive renewable energy, has become an attractive destination for major mining companies.
In 2023, these top Texas-based miners leveraged the state’s energy initiatives to lower operational energy costs. Power stated that these mining companies used less energy during peak interval hours of the month.
This approach exempts them from paying the transmission cost recovery factor for curtailed megawatt-hours, which is around $5 per MWh. Thus, it is no surprise that Riot Blockchain signed a long-term power purchase agreement with Texan authorities to cover 345 MW of hedged power bills with the option to extend through 2027 or 2030.
Power explained that this agreement protects Riot’s energy costs against future market changes. Accordingly, Riot earned up to $71.6 million in energy credits, equivalent to 2,480 BTC based on Bitcoin’s average pricing in 2023.