2023 proved to be a testing year for the Bitcoin mining ecosystem, with record-high hash rates and mining difficulty putting pressure on miners to sell Bitcoin (BTC) to cover operational costs.
An annual review of the Bitcoin mining sector published by Compass Mining highlights the significant growth in the global hash rate in 2023. The network’s hash rate started the year at 266 exahashes per second (EH/s) and would more than double to 542 EH/s to close out 2023, marking a 103% annual increase.
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The rise in hash rate was mirrored by a rise in mining difficulty, a feature baked into the Bitcoin mining protocol to maintain an average block creation time of 10 minutes. As more miners increased global hash rates, the Bitcoin average difficulty started the year at 35 T and ended at 72 T on Dec. 31.
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.
— Anthony P⭕️wer (@cazenove_uk) January 28, 2024
The company, with an operational hash rate of 6.0 EH/s, has subsequently provided revised… pic.twitter.com/qL2fjY8xGA
Hash rate battle
Bitcoin mining analyst Anthony Power unpacked how several miners increased their hash rates through 2023 to stay abreast of the network’s increase.
Power notes that Iris Energy started the year with 1.7 EH/s and grew to 5.6 EH/s within six months, marking a 273% increase. As Cointelegraph reported in December 2023, Iris aims to double its hash rate in 2024 to over 11 EH/s, and Power noted that the expansion of its Childress site in Texas could reach 20 EH/s by the year’s end with the option to acquire an additional 9 EH/s of miners.
Marathon Digital also saw a “substantial surge in its operating hash rate during 2023,” increasing by 253% from 7.0 EH/s to 24.7 EH/s. Power highlighted that Marathon aims to achieve 50 EH/s in the next two years following the acquisition of two mining sites from Generate Capital in January 2024.
Power highlighted other significant annual hash rate increases in 2023 by CleanSpark (53%), Hut 8 (New Hut, 188%), Bitdeer (168%), TeraWulf (150%) and Bit Digital (101%). Meanwhile, Riot Platforms only increased its self-mining operating hash rate by 28% in 2023 due to adverse cold weather storms that made headlines.
Biggest Bitcoin producers
The report also highlights that Core Scientific produced a total of 13,782 BTC in 2023, the highest of any United States-based miner, despite being in Chapter 11 bankruptcy throughout the year.
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Marathon Digital mined 12,843 BTC, and CleanSpark was the third-biggest U.S. miner with 7,391 BTC mined. Riot produced 6,619 BTC in 2023, which Powers noted was a lower amount than analysts had predicted before highlighting the influence of the company’s energy strategy in Texas.
The pressure of record hash rates necessitated all mining operators to sell portions of their monthly mined BTC in order to cover operational costs. Power highlighted that Marathon and Hut 8 were able to hold significant portions of their BTC treasury, holding 15,174 BTC and 9,195 BTC, respectively, as of Dec. 31.
Texas-based Bitcoin miners reduce costs
The report also provides a prime example of Bitcoin miners’ ability to adjust their consumption to meet the demands of power grids.
As Power explained, Texas’ abundant and affordable renewable energy has attracted major mining firms, which have also adhered to Texas’ ERCOT 4 Coincident Peaks (4CP) program, which incentivizes industries to curtail energy usage during peak intervals in June, July, August and September to save on subsequent-year transmission costs.
“In 2023, key Texas-based miners including Argo Blockchain, Bitdeer, Iris Energy, and Riot Platforms strategically employed energy strategies to reduce costs.”
Power added that these mining firms curtailed energy during higher-risk peak interval hours 10–15 times a month, which exempts these miners from paying the transmission cost recovery factor on curtailed megawatt-hours (MWh) (approximately $5 per mWh).
Riot Blockchain also secured a long-term power purchase agreement in Texas, covering 345 MW of hedged power costs with the option to extend through 2027 or 2030. Power added that a fixed power price enables Riot to operate continuously and negates exposure to market fluctuations.
As a result, Riot realized $71.6 million in total energy credits, equivalent to 2,480 BTC, based on the average price of 2023 Bitcoin.
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