Mining Economics: Reference Figures

Entry last verified August 2026.

The variables

Variable	Direction of effect	Who controls it
Electricity price	Lower is better	Contract, location
Machine efficiency, joules per terahash	Lower is better	Hardware generation
Network difficulty	Higher reduces your share	The whole network
Block subsidy	Halves on schedule	The protocol
Transaction fees	Variable, volatile	Network demand
Asset price	Determines revenue in currency terms	The market

A miner controls the first two. Everything else is imposed.

The difficulty adjustment

The network adjusts the target so blocks arrive at a steady rate regardless of total hash power.

The consequence is that adding capacity does not increase total rewards. It redistributes them, and any addition is competed away within one adjustment period.

This is why mining is a business where improving your own position requires being cheaper than competitors rather than doing more.

The downturn sequence

Revenue falls with price; costs are fixed by contracts and debt.

Miners first sell more production rather than holding it. Then they switch off the least efficient machines, which lowers difficulty and improves economics for everyone still running. Then the most leveraged breach covenants and their assets are sold to better-capitalised competitors.

Capacity concentrates after every drawdown for this reason.

The halving effect

Subsidy revenue halves overnight. Operations above a power cost threshold become unprofitable immediately.

Historically followed by capacity consolidation, a fall in difficulty, and recovery as remaining operators absorb the freed market share.

The fee transition

As the subsidy declines toward zero, fees must replace it or the security budget shrinks.

Fee revenue currently spikes during congestion and subsides, which makes it a volatile base for an industrial business. Whether it becomes sufficient is unresolved and is the largest open question about the long-term model.

What miner behaviour indicates

Flows from mining pool addresses to exchange deposit addresses represent production being sold.

The inverse is more informative: miners holding production are financing operations by other means, usually equity or debt issuance, which says more about capital market access than about their price view.

These flows are observable on-chain, with destinations frequently at large venues including exchanges quoting a direct fiat pair, which is how analysts identify them.

For an individual

Mining is an industrial business requiring cheap power and specialist hardware.

Retail-facing mining products, including cloud contracts, have a poor record and generally amount to paying for exposure to economics worse than simply holding the asset.