Bitcoin mining is a highly competitive industry where profitability depends on several factors, including electricity costs, hardware efficiency, and network difficulty. Over the past year, miners have increasingly used a metric called hashcost to evaluate their operational efficiency. Hashcost represents the total economic cost of generating a specific amount of computational power. But why does hashcost matter, how is it calculated, and how does it differ from operational costs? Let’s take a closer look at what hashcost is and how you can apply it to your mining business.
The Evolution of Hashprice and Hashcost
Hashcost is Not an Uniform Metric
Why Hashcost Matters for Miners
Understanding Operational Costs and Their Relation to Hashcost
How Hashcost and Operational Costs Differ
How to Calculate Hashcost and Profitability
Hashcost Formula
Hosted Mining Business
Miner-Operated Business
Premium Members Only:
Types of Hashcost Applications
Total Hashcost
Fleet Hashcost
Hashcost by Equipment
The Impact of Uptime on Hashcost
Four Ways to Optimize Hashcost
The Evolution of Hashprice and Hashcost
Hashprice is the go-to metric for miners as it represents the revenue generated per unit of hashrate, typically measured in USD per TH/s or PH/s per day. Hashprice is a function of Bitcoin price, network difficulty, block subsidy and transaction fees. This metric allows miners to assess the revenue of their operations against fluctuating Bitcoin prices, tx fees and network difficulty, without having to make complex calculations. Bitcoin’s hashprice changes with every new block added to the blockchain. Most platforms use a lagging Simple Moving Average (SMA) to account for transaction fees.
In response to hashprice, hashcost emerged as a metric reflecting the operational costs associated with mining, enabling miners to evaluate their profit margins easily and make informed decisions about their mining strategies. The concept of hashcost was introduced and refined by mining analysts and platforms that aimed to provide a clearer understanding of operational expenses in relation to miner earnings.
Hashcost is Not an Uniform Metric
Just like hashprice, hashcost is measured in in USD per TH/s or PH/s per day, indicating how much it costs a miner to produce a unit of hashing power over a 24-hour period. By tracking hashcost, miners can determine how efficiently they are running their operations and make informed decisions about hardware upgrades, power contracts, and more.
Hashprice is dictated by external factors beyond miners’ control, resulting in a uniform value for all miners. In contrast, hashcost varies amongst miners, allowing them to gain a competitive edge by optimizing their operations to achieve the lowest possible hashcost.
Why Hashcost Matters for Miners
Hashcost is a critical indicator for miners. By comparing hashcost to hashprice, miners can assess whether their operations, fleet or single machine is running at a profit or a loss.
If hashprice > hashcost, miners are in a profitable position, generating more revenue than their operational expenses.
If hashprice < hashcost, miners are operating at a loss and may need to optimize costs or shut down inefficient machines.
Understanding Operational Costs and Their Relation to Hashcost
An important input to calculate hashcost is operational costs. These operational costs refer to the ongoing expenses required to keep a mining operation running. These include electricity costs, represent the largest expense in Bitcoin mining. Hardware depreciation, the gradual loss of value of mining rigs over time. Cooling systems incur expenses related to specific heat management solutions. Infrastructure costs include expenses for maintaining mining facilities, which encompass rent, security, and internet connectivity. Regular maintenance and repairs that are necessary to keep mining rigs operating efficiently and to minimize downtime. Finally, labour and management costs consist of salaries for personnel responsible for overseeing mining operations and technical staff who maintain the equipment.
How Hashcost and Operational Costs Differ
While operational costs refer to all expenses incurred in running a mining operation, hashcost specifically measures the cost of producing one unit of hashing power per day. Essentially operational costs are absolute values (e.g., total monthly electricity and maintenance expenses), while hashcost is a derived metric that expresses these expenses in terms of computational output.
Hashcost provides a standardized way to compare mining efficiency, whereas operational costs vary based on scale and location. Miners use hashcost to benchmark their competitiveness against other miners in different regions or with different hardware.
How to Calculate Hashcost and Profitability
Hashcost Formula
To calculate hashcost, use the following formula:
Hashcost ($/PH/Day) = Fleet Efficiency (J/TH) × OpEx per kWh ($/kWh) × 24 (Hours)
Hosted Mining Business
For miners using a hosting provider, OpEx is simply the all-in hosting fee.
Example:
A miner operates 10 Antminer S21 (200 TH/s each) in a hosting facility with an electricity rate of $0.075/kWh. Given the fleet efficiency of 17.5 J/TH.
The hashcost is: 17.5 (J/TH) × $0.075/kWh × 24 hours = $31.50/PH/Day
With a hashprice of $56/PH/Day, the miner’s daily profit per PH is: $56 – $31.50 = $24.50/PH/Day
Since 10 units of S21 (200 TH/s each) amount to 2 PH/s, the total daily profit is: $24.50 × 2 = $49 per day
Miner-Operated Business
For miners running their own facility, the calculation is slightly more complex as they need to determine OpEx per kWh first. Steps to calculate OpEx per kWh:
Identify Total Operational Expenses: Sum up all costs associated with running the facility over a specific period (e.g., monthly or annually).
Determine Total Energy Consumption: Calculate total kWh consumed in the same period.
Calculate OpEx per kWh: OpEx per kWh = Total Operational Expenses ÷ Total Energy Consumption (kWh)
Once OpEx per kWh is determined, the hashcost and profitability can be calculated using the same formula as above.
The following content is exclusively for our Premium Members:
Types of Hashcost Applications
Total Hashcost
Fleet Hashcost
Hashcost by Equipment
The Impact of Uptime on Hashcost
Four Ways to Optimize Hashcost
