2023 proved to be a testing year for the Bitcoin mining ecosystem, with record high hash rates and mining difficulties forcing miners to sell BTC to cover operating costs.
Compass Mining's annual review of the Bitcoin mining sector highlights significant growth in global hash rates through 2023. The network hash rate was 266 EH/s at the beginning of the year, and by the end of 2023 it will more than double to 542 EH/s. marking year-on-year growth of 103%.
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The increase in hash rate has been reflected in the increase in mining difficulty, a feature built into the Bitcoin mining protocol that allows it to maintain an average block creation time of 10 minutes. As more miners increased the global hash rate, Bitcoin's average difficulty started the year at 35 T and ended at 72 T on December 31st.
In 2023, several miners significantly increased their hash rates.$IREN started the year with 1.7 EH/s and witnessed a growth to 5.6 EH/s within six months, marking a 273% increase.
The company, with an operational hash rate of 6.0 EH/s, has subsequently provided revised… pic.twitter.com/qL2fjY8xGA
— Anthony P⭕️wer (@cazenove_uk) January 28, 2024
Battle for hashrate
Bitcoin mining analyst Anthony Power revealed how several miners have increased their hash rates through 2023 to keep up with network growth.
Power notes that Iris Energy started the year at 1.7 EH/s and rose to 5.6 EH/s within six months, marking a 273% increase. As reported in December 2023, Iris aims to double its hash rate in 2024 to more than 11 EH/s, and Power notes that the expansion of its Childress site in Texas could reach 20 EH/s by the end of the year, with the option to purchase an additional 9 EH/s s miners.
Marathon Digital also saw “significant growth in operational hash rate in 2023,” increasing by 253% from 7.0 EH/s to 24.7 EH/s. Power highlights that Marathon aims to achieve 50EH/s within the next two years following the acquisition of two mining properties from Generate Capital in January 2024.
Power sees other significant annual hash rate increases in 2023 thanks to CleanSpark (53%), Hut 8 (New Hut – 188%), Bitdeer (168%), TeraWulf 150% and Bit Digital (101%). Meanwhile, Riot platforms only increased their operational self-mining hashrate by 28% in 2023 due to adverse weather conditions that made headlines.
Largest Bitcoin Producers
The report also highlights that Core Scientific mined a total of 13,782 BTC in 2023, the highest of any US miner, despite being in Chapter 11 bankruptcy for a year.
Related: Iris Energy to double hash rate in 2024 with $22 million order for Bitmain T21 mining rig
Marathon Digital mined 12,843 BTC, and CleanSpark became the third largest miner in the US with 7,391 BTC mined. Riot mined 6,619 BTC in 2023, which Powers notes was less than what analysts had predicted, before highlighting the impact of the company's Texas energy strategy.
The pressure of record hash rates has forced all mining operators to sell a portion of their monthly mined BTC to cover operating costs. Power highlights that Marathon and Hut 8 were able to hold onto a significant portion of their BTC treasury: as of December 31, they held 15,174 BTC and 9,195 BTC, respectively.
Texas Bitcoin Miners Cut Costs
The report also provides a striking example of Bitcoin miners' ability to regulate their consumption according to the needs of the power grid.
As Power explains, Texas' abundant and affordable renewable energy sources have attracted large mining companies, which have also joined Texas' ERCOT 4 Coincident Peaks (4CP) program, which incentivizes industries to reduce energy use during peak periods of June, July, August and September. save on transmission costs next year.
“In 2023, key Texas miners, including Argo Blockchain, Bitdeer, Iris Energy and Riot Platforms, strategically applied energy strategies to reduce costs.”
Power adds that these mining companies have been cutting power during high-risk peak hours 10-15 times per month, which exempts these miners from paying the transmission cost recovery factor for the MWh cut (approximately $5 per MWh).
Riot Blockchain also entered into a long-term power purchase agreement in Texas covering 345 MW of hedged power costs with an option to extend until 2027 or 2030. Power adds that the fixed price of electricity allows Riot to operate continuously and mitigate exposure to market fluctuations.
As a result, Riot sold $71.6 million in energy credits, which is equivalent to 2,480 Bitcoin based on the average 2023 Bitcoin price.