Bitcoin mining is an intricate process that requires significant investment in hardware and energy. For miners, two critical factors shape profitability and sustainability: the cost of energy and the efficiency of the mining hardware, particularly ASIC (Application-Specific Integrated Circuit) mining rigs. Understanding and optimizing these factors can mean the difference between thriving in a competitive market and operating at a loss.
Sustainability Matters
Beyond profitability, there is growing scrutiny on the environmental impact of Bitcoin mining. Energy-efficient ASIC rigs and the use of renewable energy not only reduce costs but also contribute to a more sustainable mining operation. Miners who prioritize efficiency and green energy can enhance their reputation and attract partnerships, securing their place in an increasingly eco-conscious industry.
Energy Costs: A Key Determinant of Profitability
Mining Bitcoin is energy-intensive, with miners running powerful ASIC machines 24/7 optimized to perform the specific calculations needed for Bitcoin mining much more efficiently. The energy consumed is substantial, making electricity costs, effectively the largest expense for miners. Miners often operate in areas with low electricity rates or partner with energy providers to secure favorable deals.
High energy costs can quickly erode profitability, especially during periods of low Bitcoin prices or reduced mining rewards. For instance, the halving events that occur approximately every four years reduce the reward for mining a block by half, squeezing profit margins further. Thus, miners must constantly assess the cost per kilowatt-hour (kWh) and explore renewable energy sources or more efficient power management systems to stay competitive.
We have witnessed the North American public miners set their operations in Europe, Africa, Asia and more recently South America, to seek the opportunity to achieve cheaper and renewable energy. Hive Digital (HIVE) have operations in Canada, Iceland, Sweden and more recently commenced the construction of their flagship site in Paraguay, where they expect their facility to be energized and producing Bitcoin in the second half of 2025. Marathon Digital successfully set up Bitcoin mining joint ventures in Abu Dhabi and Paraguay.
Efficiency of ASIC Mining Rigs: The Game Changer
ASIC mining rigs are purpose-built for Bitcoin mining, offering superior performance compared to general-purpose computers or GPUs. The efficiency of these rigs is measured in terms of their hash rate (the speed at which they solve computations) and power consumption. A higher hash rate with lower energy use translates directly to greater profitability.
Modern ASIC rigs, such as those from leading manufacturers, boast energy-efficient designs that optimize computational power while minimizing electricity usage. Investing in newer, more efficient models can reduce the cost of energy per mined Bitcoin, enabling miners to compete effectively even in volatile markets. However, the upfront cost of such rigs is significant, requiring miners to carefully evaluate their return on investment.
In 2024, North America's largest miners made substantial investments with leading ASIC manufacturers, including Bitmain, MicroBT, and Canaan, contributing more than 125 EH/s to the network. This accounted for 50% of the global hash rate increase during that period. Notable contributions included Marathon Digital (MARA) adding 28.5 EH/s, CleanSpark (CLSK) with 29.0 EH/s, IREN (IREN) increasing by 25.4 EH/s, and Riot Platforms (RIOT) expanding their hash rate by 19.1 EH/s.
The Balancing Act: Strategic Planning for Success
Balancing energy costs and hardware efficiency is a strategic endeavor. Miners need to account for operational expenses, market volatility, and evolving technology trends. Diversifying energy sources, such as integrating solar or wind power, can help stabilize costs and reduce reliance on traditional energy grids.
Furthermore, miners benefit from continual monitoring and optimization of their setups. Just as a handyman reviews tools for specific jobs, miners must ensure their rigs are updated, calibrated, and maintained to deliver peak performance. Adopting a mindset of continuous improvement—whether in hardware, software, or energy procurement—positions miners for long-term success.
A Worked Example: Analyzing Bitcoin Miners' Strategies and Performance
Over the past 18 months, some of the largest Bitcoin miners in North America have focused heavily on securing low-cost energy and upgrading to the most efficient mining hardware. These strategies have been central to maintaining profitability in a volatile market.
The following table provides a comparative analysis of several leading miners, incorporating the current Bitcoin price, power costs, and fleet efficiency, all derived from recent company filings, operational updates, and presentations. By referencing the Global Hash Rate (7-day average), we can estimate each miner’s potential monthly revenues. To this, I have added an assumed 2.5% transaction fee per block, in addition to the 450 Bitcoin produced daily, to estimate total revenue.
In terms of cost estimation, the primary factors influencing mining expenses are fleet efficiency, power cost, and hash rate. This analysis excludes other "direct" costs such as direct labor, and hosting fees to provide a more standardized comparison. No assumptions regarding curtailment have been made, as the impact would be minimal and consistent across all miners in terms of margins achieved.
IREN (Iris Energy) has been the most aggressive in pursuing fleet efficiency. Their hash rate grew substantially in 2024, reaching 31 EH/s—an impressive annual rise of 454%. Additionally, they secured Bitmain's S21 miners, the most efficient on the market, achieving an industry-leading efficiency rate of 15 J/TH. With their largest site in Childress, Texas, benefiting from a favorable energy rate of approximately $0.032 per kWh for the first half of 2024, IREN’s combination of fleet efficiency and low-cost energy has led to a potential gross mining margin of 79%.
Cipher Mining (CIFR) follows closely with a gross margin of 77.8%. Cipher's lower power cost of $0.027 per kWh has helped maintain a competitive edge, while Core Scientific (CORZ), with an industry-leading energy cost of $0.025 per kWh, achieves a mining margin of 73.7%. However, Core Scientific’s older and less efficient fleet places them third in terms of margin despite the favorable power rates.
This analysis highlights the critical role that both energy costs and fleet efficiency play in optimizing mining profitability. As competition intensifies, miners will continue to prioritize these factors to maintain margins and stay competitive in a challenging market.
Conclusion
For Bitcoin miners, energy costs and mining fleet efficiency are crucial factors for profitability and long-term success. With electricity being the largest operational expense, miners must optimize energy procurement, often seeking low-cost or renewable energy sources. Efficient ASIC rigs are essential for reducing energy consumption while maximizing computational power, directly impacting profit margins.
Miners like Iris Energy, Cipher Mining, and Core Scientific are currently demonstrating how combining low energy costs with high-efficiency hardware can improve financial outcomes. Additionally, as environmental concerns rise, adopting sustainable practices, such as using renewable energy, not only reduces costs but enhances reputation. Miners that strategically balance these factors will be better positioned to thrive in an increasingly competitive and eco-conscious market.
