Mining economics, and why the margin compresses

Break-even is the point at which the revenue a machine produces equals the cost of running it. The revenue depends on three things: how much hash rate the machine contributes, what share of the network's total hash rate that represents, and what the network pays per block. The cost depends on two: how much power the machine draws and what that power costs per unit. Setting the two equal gives the condition a miner is trying to stay above.

The important property of this condition is that it is not fixed. The share of network hash rate a given machine represents falls whenever anyone else adds capacity, because the total rises while the machine's own output does not. The difficulty adjustment then restores the ten-minute block interval, which means the network's total revenue per unit of time stays roughly constant while the number of machines competing for it grows. Each new entrant therefore reduces every existing miner's share.

This is why mining is described as a competitive equilibrium rather than a profitable industry in the ordinary sense. When margins are wide, new capacity is attracted in; that capacity raises difficulty, which compresses margins until entry stops. When margins are negative, the least efficient operators shut down, difficulty falls, and the remaining operators recover. The equilibrium is not a comfortable margin but the absence of an abnormal one, and it is enforced by the difficulty adjustment rather than by any regulator.

Hashprice is the revenue a unit of hash rate can expect to earn over a period, expressed in currency per unit of hash rate per day. It collapses the revenue side of the calculation into a single number, which makes it possible to compare a machine's expected income against its energy cost without working through the block-level arithmetic each time. It is a derived figure, not a protocol quantity, and it moves with the price of bitcoin, the difficulty, and the fee share of block revenue.

Because it is derived, hashprice must always be quoted with its vintage and its assumptions. A figure computed from the current difficulty and the current price is a snapshot that will be wrong tomorrow; a figure averaged over a month is smoother but lags a change in either input. Two providers can publish different hashprice series and both be correct, because they are answering slightly different questions about the same underlying quantities.

The measure is useful precisely because it separates the two sides of the business. A miner who knows their machine's efficiency and their power cost can compare that against the published hashprice and see whether they are above or below break-even, without needing to model block discovery. What hashprice cannot tell them is what will happen next, because both of its inputs — price and difficulty — are outcomes rather than forecasts.

The subsidy halves every 210,000 blocks. The cost of running a machine does not halve on any schedule; it declines only as more efficient hardware replaces older equipment, and that decline is gradual and requires capital expenditure. So each halving removes half of one revenue component while leaving the cost base substantially intact, and the industry must adjust by retiring the least efficient capacity.

The adjustment is not a smooth glide. A halving that arrives when the price is high may be absorbed with little disruption, because the currency value of the reduced subsidy is still comfortably above the cost of the marginal machine. The same halving arriving after a price decline can push a large fraction of the network below break-even at once, forcing shutdowns until difficulty falls far enough to restore the survivors to profitability. The schedule is predictable; the conditions it lands in are not.

Over the long run the direction is the same for everyone. The subsidy is scheduled to reach zero, and at that point miner revenue is fees alone. Whether that is enough to sustain a security budget that makes the chain expensive to rewrite is the open question in Bitcoin's design, and it is not settled. What can be said with confidence is that the transition will be uneven, that it will be hardest for the operators with the highest energy costs and the least efficient machines, and that the difficulty adjustment will keep the block interval at ten minutes throughout. The miner revenue page sets out the two components being compressed, and the supply schedule page gives the epoch sequence in full. The hashrate page explains the quantity that difficulty is competing over.