In 2008, Satoshi Nakamoto chose gold mining as the central metaphor for a new decentralized digital payment system. As the Bitcoin inventor explained, the distribution of BTC to participating computers is similar to miners expending resources to dig up gold. “In our case, it is CPU time and electricity that is expended,” Nakamoto’s White Paper noted.
More than 15 years later, GPUs have mostly replaced CPUs, but the general formula remains the same. However, since 2008, Bitcoin’s hash power has skyrocketed, hitting an all-time high of around 475 Exahashes per second (EH/s) on Monday, November 6.
If the home computers that powered the early Bitcoin network were akin to gold rush frontiersmen equipped with picks and shovels, today’s largest Bitcoin farms operate at an equivalent scale to industrial goldmines.
Around the world, immense, purpose-built data centers have eclipsed home mining operations. Of course, it’s still possible to mine BTC with a more humble setup, but these days, most of the 475 quintillion cryptographic hashes that power the Bitcoin network are generated by companies like Marathon Digital and Riot Platforms.
The former, which is the world’s single largest Bitcoin miner, reported on Wednesday, November 8, that its average hash rate for the third quarter of 2023 was 14.2 EH/s. Representing 4% of the network’s total, Marathon’s heavyweight hash power raked in 3,490 BTC in 3 months.
Since Q3 2022, the firm’s maximum mining capacity has risen by more than 500% to 23.1 EH/s.
Meanwhile, Riot’s Q3 mining operations produced 1,106 BTC. Since repairing storm damage at its Texas facility, the company reported a new record hash rate capacity of 10.9 EH/s. It expects to increase this to 20.2 EH/s by mid-2024.
But bigger doesn’t always mean better. Compared to other publicly traded Bitcoin mining companies, Marathon and Riot are arguably overvalued. With their booming hash rate capacity, both firms have made considerable efficiency gains.
To get more bang for their buck, i.e. a higher hash rate per dollar spent on electricity, large Bitcoin miners have negotiated contracts with their local electricity providers that mean they pay less than average participants in the grid.
For example, in Texas, Riot modulates its electricity usage according to demand, soaking up excess power when demand is low and scaling back operations during peak times. The firm also receives “power curtailment credits,” allowing it to sell pre-purchased power energy to the grid at market-driven spot prices.
While Riot has focused on syncing its Texas facilities with the rhythms of local electricity usage, Marathon is trying to boost efficiency by doubling down on renewable energy and generating cheaper electricity at the source.
According to CEO Fred Thiel , initiatives like the planned hydroelectric mining facility in Paraguay make Marathon “the most energy-efficient Bitcoin mining operations globally.”