Competition Over Bitcoin Mining in 2023 — Rising Hash Rates Surpass Commercial Benchmark

The annual assessment of the Bitcoin mining industry sheds light on the challenges faced by large-scale miners in coping with unprecedented hash rates and difficulty adjustments.

Source: news.bitcoin.com

The year 2023 posed substantial challenges for the Bitcoin mining ecosystem, witnessing historic highs in hash rates and mining difficulty. This surge created a scenario where miners felt compelled to sell Bitcoin in order to offset escalating operational costs. Compass Mining's annual review underscored the remarkable growth in the global hash rate throughout 2023, starting the year at 266 exahashes per second (EH/s) and concluding at an impressive 542 EH/s—a remarkable 103% annual increase.

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The ascent in hash rate was accompanied by a corresponding increase in mining difficulty, an inherent aspect of the Bitcoin mining protocol designed to uphold an average block creation time of 10 minutes. Throughout the year, the escalating global hash rates led to a rise in Bitcoin's average difficulty, starting at 35 T and concluding at 72 T on December 31.

The hash rate of bitcoin increased rapidly in 2023. Source: CoinWarz/Compass Mining

Bitcoin mining analyst Anthony Power delved into how numerous miners strategically elevated their hash rates in 2023 to keep pace with the network's expansion. In addition, Iris Energy exemplified this trend, initiating the year with a hash rate of 1.7 EH/s and experiencing remarkable growth to reach 5.6 EH/s within six months, reflecting a substantial 273% increase. Iris Energy aims to double its hash rate in 2024, targeting over 11 EH/s, with plans for the Childress site in Texas potentially reaching 20 EH/s by year-end and an option to acquire an additional 9 EH/s of miners. Marathon Digital also underwent significant growth, witnessing a 253% surge in its operating hash rate from 7.0 EH/s to 24.7 EH/s in 2023. 

Marathon has ambitious plans to achieve a hash rate of 50 EH/s over the next two years, fueled by the acquisition of two mining sites from Generate Capital in January 2024. Anthony Power highlighted additional notable annual hash rate increases in 2023 by various players, including CleanSpark (53%), Hut 8 (New Hut, 188%), Bitdeer (168%), TeraWulf (150%), and Bit Digital (101%). However, Riot Platforms faced challenges, registering only a modest 28% increase in its mining operating hash rate in 2023, primarily due to adverse cold weather storms that garnered media attention.

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