Tag: Bitcoin mining

Bitcoin (BTC) miners in 2023 have collected a daily average of $2 million in transaction fee revenue, according to data from Coinmetrics.

The value reportedly showcases a 400% increase compared to last year’s averages.

Bitcoin Miners Revenue Increases Year Over Year

According to a Dec. 23 post on X (formerly Twitter) made by Jameson Lopp, the Co-founder and CTO of BTC self-custody solutions company Casa, Bitcoin miners generated revenue exceeding $10 billion in 2023, adding to the total of $57 billion collected in the past 15 years.

Revenue collected via transaction fees by bitcoin miners averaged nearly $2,000,000 per day in 2023. This is up 400% year over year. pic.twitter.com/zZjUwy1Gbh

— Jameson Lopp (@lopp) December 23, 2023

In the post, Loop reckoned the estimation could mean miners immediately convert Bitcoin to fiat currency. However, he said it was improbable that was the case, as miners often embrace “HODLing” onto their Bitcoin asset for potential long-term gains.

This month, miners’ total daily revenue block rewards and transaction fee revenues clocked an annual high of $64 million, almost a 400% increase from its year-to-date value, per data from Ycharts. Since the start of December, the daily mining activity revenue hasn’t dropped below $33.85M, signifying a large profit intake for miners in Q4 2023.

Coin Metrics also revealed the quarterly mining revenues in 2023 surpassed $2B over the last three-quarters of the year, with transaction fees collected by miners climbing over $180M in Q2 and Q4.

Mining Hashrate and Difficulty Soar as Profitability Woes Rise

In 2023, the Bitcoin network witnessed a massive surge in mining hashrate. According to Coin Metric’s State of the Network Q4 2023 Mining report, the hashrate jumped from 250 Exahashes per second (EH/s) at the start of the year to 480 EH/s.

The rise in hashrate has led to a 26% increase in Bitcoin mining difficulty over the past three months, per Coinwarz data.

With the rise in BTC mining hashrate and difficulty, profitability could take a slump, and the upcoming halving event may spell even more woes for miners overall, as the event is set to slash rewards from the current 6.25 to 3.125.

However, experts believe Bitcoin’s halving may subsequently decelerate the fast-rising mining difficulty. Furthermore, the rising hashrate showcases improving network security, which may rapidly help BTC’s price charge toward the bull market.

Earlier this month, CryptoQuant Chief Researcher Julio Moreno posted on X that the Bull-Bear market cycle indicator is signaling a recent transition into a bullish period for the first time since July. Based on the indicator, Moreno believes block rewards will increase faster than mining difficulty, increasing miners’ profitability despite the heightening mining difficulty.

Bitcoiners are blasting the British Broadcasting Corporation (BBC) following the outlet’s recent article discussing the blockchain network’s energy consumption.

The public broadcaster cited a study claiming that every Bitcoin transaction consumes “a back yard swimming pool” worth of water, though critics say that the claim is based on “junk science.”

Does Bitcoin Use Too Much Water?

As published on Wednesday, the BBC’s article claimed that Bitcoin’s water consumption relates to the sources of electricity that secure its blockchain through “proof of work” mining – Bitcoin’s internal mechanism that relies on energy to ensure that nobody can spend the same transaction twice.

That includes water consumed at any venues connected to the mining process – such as gas and coal plants, hydroelectric damns, or water used to cool Bitcoin mining machines themselves.

According to the reference study published in Cell Reports Sustainability, this amounted to 1,600 gigalitres of water in 2021 and could surpass 2,200 gigalitres in 2022.

Yet there’s a few glaring issues: firstly, the study was written by Alex de Vries – an employee of the Dutch Central Bank who has a history of wildly inaccurate predictions about Bitcoin’s energy consumption and climate impact.

As noted by CH4 Capital co-founder Daniel Batten, de Vries estimated in 2017 that Bitcoin mining would devour 50% of the world’s energy by the year 2020 – a prediction that missed by 2509x.

“Had the BBC done their homework, they would have uncovered de Vries’ history as Central Bank lobbyist against Bitcoin,” wrote Batten. The co-founder’s fund invests in companies that use purified landfill gas to mine BTC, which would otherwise be flared off and pollute the climate through methane emissions.

The author’s figure is also based on a flawed metric: Bitcoin does not consume energy on a per-transaction basis, but is instead based on the miners using the network to earn BTC.

Though some miner revenue is based on network transaction fees, the vast majority still comes from a fixed block reward that exists independently of transaction volume.

Other outlets have already cited de Vries and exaggerated his claim even further, stating that a single Bitcoin “trade” uses a swimming pool of water. As of today, most Bitcoin trades take place on centralized exchanges rather than directly on the blockchain, meaning they’re completely removed from the mining process.

I thought bitcoin was bad with 16k liters of water per on chain transaction, but it gets way worse. It turns out even a single bitcoin *trade* uses up an entire swimming pool of water!

There are 10M swimming pools in the USA. By my calculation, we should be out of water by… pic.twitter.com/Vj5CU8x5uL

— Yan | swan.com (@skwp) November 30, 2023

Familiar FUD for Bitcoiners

Recent estimates from Bloomberg have found that Bitcoin mining boasts a >50% green energy mix worldwide – more than virtually any other industry on the planet. Survey data from the Bitcoin Mining Council would support this figure, with recent estimates as high as 59.9%.

Nevertheless, Bitcoiners are accustomed to bad press about the network’s electricity use. In 2021, Elon Musk famously stopped accepting BTC for car payments at Tesla due to environmental concerns.

A year later Ripple co-founder Chris Larsen funded a $5 million public campaign to end Bitcoin mining in collaboration with GreenpeaceUSA and the Environmental Working Group.

So far, the online Bitcoin community has laughed at lobbyist efforts to change Bitcoin’s code – and they’ve done the same with the BBC’s latest piece.

“We almost had decentralized digital cash but it evaporated all of the world’s fresh water resources first,” wrote Dylan LeClair, Bitcoin analyst for UTXO Management, on Wednesday. “Thankfully the BBC is sounding the alarm on this.”

An unknown Bitcoin (BTC) user paid an 83.6 BTC ($3,136,058) transaction fee while moving his coins on Thursday, marking the largest transaction fee the network has ever recorded in dollar terms.

The total size of the transaction was 139 BTC ($5,198,720.84), meaning less than half of the transfer (55.7 BTC) actually reached the recipient.

Another Costly Transaction Mistake

The costly transaction was sent from wallet address bc1qn3d…wekrnl to address bc1qyf…km36t4 on November 23, at Bitcoin block 818087.

According to mempool.space, the fee was overpaid by a factor of 119,980x, based on the block’s 141/sat/vb cost at the time.

On Bitcoin, users can voluntarily attach a fee to their transactions so that the network will process them faster.

Specifically, the Bitcoin miner responsible for building the network’s next block will be more incentivized to include that transaction within the block’s limited storage space, since he will earn the attached fee as a reward.

Bitcoin includes a feature for senders called “replace by fee” (RBF), with which a still unconfirmed Bitcoin transaction may be replaced by another with a higher fee attached if the first one wasn’t sufficient.

According to mempool developer @mononautical on X, the sender may not have known that RBF orders cannot be canceled, and repeatedly tried to cancel the transaction with higher fees.

The transaction’s RBF history shows that the last replacement attempt added another 20% to his transaction fee, adding 12.54 BTC in unnecessary costs.

What Will Happen To The Money?

Though the sender and recipient are still unknown, the winner of the block’s fee was Antpool – one of the world’s largest Bitcoin mining pools based in Asia.

Antpool was responsible for 29.4% of Bitcoin’s total hash rate over the past 3 days and has normally averaged 1.6 BTC in transaction fees per block, according to Hashrate Index.

Under normal circumstances, mining pool operators split profits from block rewards and fees between themselves and their constituent miners, depending on their specific contractual arrangements.

However, a similar case involving a large accidental fee sent by Paxos in September was graciously returned later by F2Pool.

“Antpool I guess would pay it back once contacted by the transactor,” wrote Blockstream CEO and Bitcoin developer Adam Back to X on Tuesday.

For the first time in three months, the top 13 publicly traded crypto mining companies have sold more bitcoins (BTC) than they produced.

According to Bitcoin mining research platform TheMinerMag, the liquidation-to-production ratio for miners like Marathon Digital, Core Scientific, Argo Blockchain, Bitfarms, Bit Digital, Hut 8, Iris Energy, and Terawulf was 105% in October, meaning they sold all their mined coins plus assets from their holdings.

Miners Sold More BTC Than Mined in October

In October, Bitcoin’s 28% rally to around $35,000 brought the leading digital asset to an 18-month high. The amount of liquidation by the top 13 public mining companies tapped into BTC’s 30% monthly gain, as the firms sold 5,492 BTC – worth roughly $164 million.

October’s liquidation-to-production ratio was higher than that of July, August, and September, which had 64%, 77%, and 77%, respectively. The ratio peaked as the bear market began to take its toll in June 2022 to 360% before plunging in August of the same year to around 80%.

Notably, some mining companies have consistently sold all their mined BTC every month, but firms like Marathon, Hut 8, Cipher, CleanSpark, and Bit Digital use a hybrid treasury strategy, and they liquidated more in October than in previous months. Bit Digital and Hut 8, which sold 422 and 365 BTC, respectively, had the highest individual ratios, liquidating over 300% of their monthly productions.

Preparation for Bitcoin’s Upcoming Halving

Bitcoin miners could sell a higher portion of their mined assets for several reasons, including replenishing their cash reserves or realizing profits off price rallies. Another major reason is to stock up cash in preparation for the upcoming Bitcoin halving event, which would slash their block rewards by half.

The Bitcoin halving occurs approximately every four years or after every 210,000 blocks and will continue in the same manner until all 21 million BTC have been mined.

The mechanism controls the issuance of new BTC by reducing the number of coins mined in a day. The last halving event in May 2020 slashed the network’s block reward from 12.5 BTC to 6,25 BTC, and the next, scheduled for April 2024, will implement a reduction to 3,125 BTC.