Published on: 2014-10-28T20:17:58+00:00
The article discusses the profitability of Bitcoin mining after the reward halving event. It introduces the concept of Miner Income Multiple (MIM), which is the ratio between the total revenue a miner receives and the cost of electricity spent on mining (C_e). The author presents a theorem stating that if a miner's MIM is less than 0.5 before the subsidy halving, and if bitcoin and electricity prices remain the same, then mining will no longer be profitable after the halving.The worst-case scenario is when a miner's MIM is close to zero before the halving, leading to approximately half of all hashpower dropping out. The article estimates that the long-term MIM will be less than 50% when the ratio of the cost of electricity to the cost of hardware (f) is greater than 1. To illustrate this point, the author uses the example of Spondoolies Tech's SP35 Yukon unit, which costs $4000 and consumes 3.5 KW, with a useful lifetime of more than two years. Based on these numbers, the total expenditures on electricity for this device will be at least $6135, resulting in an f value greater than 1.5 and an MIM lower than 0.5.Despite the concerns raised about the profitability of mining after the reward halving, the author suggests that there is hope that it won't be critical as long as the hashpower drop remains below 50% in the equilibrium break-even situation. However, there is a potential threat of the hashrate dropping by more than 50% immediately after the halving due to the slow difficulty update. This poses a real challenge for miners and highlights the need for timely adjustments to maintain profitability.In conclusion, the article analyzes the impact of the reward halving on Bitcoin mining profitability. It introduces the concept of MIM and presents a theorem indicating that mining may no longer be profitable if the MIM falls below 0.5. The author discusses the potential scenarios and presents an example to illustrate the calculations. While there is hope that the hashpower drop will not exceed 50% in the equilibrium break-even situation, the immediate post-halving period poses a real threat due to slow difficulty updates.
Updated on: 2023-08-01T10:32:39.656934+00:00