What is a miner’s life span?

A miner's life cycle is not endless. During operation, it must return the investment (pay off), and then earn as much as possible.

To begin with, offhand (as of 12/2023), let's estimate how long a miner can operate before losing profitability, provided that everything is physically fine with it. That is, how soon it will stop generating profits due to the changed mining parameters - hashrate and network difficulty. Here, we will refer to bitcoin mining and the SHA-256 encryption algorithm corresponding to its network.

What kind of profitability do SHA-256 miners offer?

Let's use Asicminervalue. Let's enter the Electricity cost value of $0.08/kWh, the SHA-256 algorithm, sort by the device’s release date and see what happens in the daily profit column on the right.

As of December 2023, everything is more or less optimistic at the top of the table. As always, more or less.

Using the example of Bitmain's recent flagship Antminer S21 Hd (335 TH/s), we can estimate the overall drop in bitcoin mining profitability by March 2025:

Moving down the list to the 2021 release year, you can see that with a few exceptions, most models already look pretty outdated.:

By March 2025, the Antminer S19j Pro 104 TH/s had already become unprofitable at $0.08 per kW/h:

If we go even lower, the irrelevance of the 2019-20 miners becomes obvious:

This trend does not depend much on the market conditions, that is, any time slot will produce similar results, namely that after about three to four years any miner becomes unprofitable even if it is still physically able to work. For large companies with access to the cheapest possible electricity, this period is longer.

At the same time, the average estimate of the miner's physical life is 3-5 years in terms of technical capabilities.

The average estimate of a miner's physical life is 3-5 years

So, during the period of market growth (12/2023 BTC~$44,000; 01/2025 BTC~$100,000), modern miners are able to generate relatively high daily income.

What is a miner’s payback period?

Knowing the price of a particular model and electricity cost, you can always estimate a miner’s payback period under current conditions.

However, miner prices are very dynamic.

As you can see, based on historical data, fluctuations in miner prices can reach 85% within a year, and three or four years later, the price of a miner may even reset to zero. At the same time, the bitcoin exchange rate can show similar dynamics. Therefore, ideally, those who are engaged in mining should buy miners during the market decline at minimum prices, and sell miners that have worked for a sufficient period of time at market highs at the peak of demand.

Effective mining fleet management is a separate issue, and, when approached properly, it can have a very positive impact on the payback period and the project profitability as a whole.

The most convenient and widely used formula for estimating miner cost is the following:

D — static days until break-even

C — upfront capital expenditures

P — current bitcoin price

S — purchased equipment hashrate

H — network hashrate

m — block reward (currently it is equal to 3.125 BTC)

n — current average transaction fee per block

k — equipment efficiency (W/TH)

r —  total electricity cost ($/kWh) 

The cost of a miner is almost entirely determined by its payback period in current market conditions. A minor contribution is made by the brand and the model.

If we select several models with different release years, for most of them Asicminervalue and similar services will actually show about the same payback time, namely 300 days ($0.08/kWh) despite seemingly different characteristics:

For the most up-to-date models, whose price is obviously higher (e.g., M63S), the service will show a payback period of about 500 days due to increased expectations of reliability, duration and efficiency after payback.

However, in all cases, it should be understood that these estimates are correct only if the mining parameters are maintained - however, as a rule, they deteriorate over time.

Also, based on historical data from 2019-20, you can see that as the market negativity increased and the BTC exchange rate fell, the payback period of the once-popular Bitmain Antminer S17 model, used as an example, ranged from 100 days to 1000 and above (according to Anicca Research). Miner prices rose and fell accordingly.

In fact, in relatively stable conditions , a gradual increase in the difficulty of calculations, periodic maintenance, etc., the payback period of the miner is usually 1 - 1.5 years, subject to other costs.

How does HIVE mining work?

So, according to a press release from one of the largest mining companies, HIVE Digital Technologies, dated Dec 7, 2023:

“The Company notes that in its strategy to acquire ASICs for best cash flow ROI, some of our purchases in the last year, notably our S19j Pro purchases from December 2022 have already paid themselves off (over 100% ROI approximately) after accounting for electrical operating costs. The Company maintains that by opportunistically purchasing machines with immediate delivery, and at low $/TH prices, HIVE can realize returns on our investments, thus we aim to expand accretively, where our ASIC investments pay themselves off.

The approximately 29,000 ASICs were purchased at an average price of approximately $13.70/TH, which the Company believes is a very attractive acquisition price for machines with an average fleet efficiency of 26 J/TH”.

The Antminer S19j Pro ASIC model mentioned in the release can be found in Fig.2 above and in our table.

At the end of 2023, the model was still relevant despite its release date of July 2021, especially with electricity prices below $0.08, which a giant like HIVE undoubtedly has access to.

At a price of $0.04 per kW/h, this miner is able to earn even in March 2025!

However, HIVE notes the following in the release:

“As more people mine Bitcoin (difficulty increases), the daily Bitcoin block reward which presently is fixed at 900 Bitcoin per day, gets split amongst more miners; thus, each miner receives a smaller portion of the block reward. Conversely, as Bitcoin prices fall, many miners may lose money, and power down, taking their hashrate off the network, causing Network Difficulty to decrease.

Those miners with the lowest costs of production, by virtue of having more efficient machines and/or lower energy costs, are able to continue their production during these volatile cycles. Not all miners will continuously mine during the month, as a result some miners will produce less Bitcoin than expected, relative to their advertised hashrate. For the foregoing reasons, HIVE will self-curtail part of its operations if the unhedged spot energy prices are uneconomical, thereby leaving part of its total gross hashrate unutilized.

All Bitcoin miners are striving to use the most efficient Bitcoin ASIC chips, and we are happy that we have been able to upgrade our global fleet during this crypto market downturn”.

The company does not resell second-hand miners, but has a responsible approach to creating a fleet at extremely low prices, which minimizes costs and reduces the time to making a profit.

Is it possible to make money by selling a paid-off miner?

In another business model, which implies the timely sale of secondary miners, the miner should work for at least a year after reaching payback and maintain profitability.

The market situation does not always allow you to profitably sell a miner after it has paid off and earned well. Provided that in the time remaining after reaching payback, the miner should earn the maximum and can still be sold, it should not be completely old and properly maintained, that is, the front and rear fans (depending on the design) must be regularly removed, dusted, and and the heating ducts under the top cover should also be cleaned from accumulated dirt. The miner is not working during maintenance.

The resale business model is more suitable for relatively small and diversified companies, where business optimization is of key importance for survival.

How large mining companies manage mining

In turn, large mining companies such as Marathon, Riot, HIVE, etc. fully utilize the miners' resources, since they have access to the cheapest possible electricity and aim for extremely rapid growth. There is no need for such companies to build a business within a business in order to try to earn on old miners, rather than just send them for scrap. To protect themselves from negativity, they accumulate bitcoins and cash, which, among other things, allows them to buy up small players on the verge of survival (entire fleets of secondary miners).

The Marathon Digital Holdings, Inc. report for 2022 states the following:

“In accordance with ASC 360 - “Impairment and Disposal of Long-Lived Assets” (“ASC 360”), long-lived asset (group) that is held and used must be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the long-lived asset (group) might not be recoverable. Due to the decrease in the cost of bitcoin mining rigs that was driven by the drop in bitcoin prices during the fourth quarter ended December 31, 2022, the Company assessed the need for an impairment write-down of its bitcoin mining rigs. In accordance with ASC 360-10, the Company first determined that the carrying value of its bitcoin miners is not recoverable. As its bitcoin mining rigs further had a carrying value in excess of fair value, the Company recognized an impairment charge for its bitcoin mining rigs of approximately $208,622 thousand for the year ended December 31, 2022. The fair value of the bitcoin miners determined primarily using observable prices for similar assets as of December 31, 2022 was $265,000 thousand (Level 2).

As a result of the above impairment charge for its asset group of bitcoin mining rigs, the Company re-evaluated and reduced the estimated useful life for its asset group of mining rigs from 5 to 3 years, effective January 1, 2023”.

What is the typical estimated duration of a miner's work in the business plan?

So, 3 years is a kind of a moment of truth for a miner, when it is either disposed of or has a chance to fight for a second life. For the latter case to be realized, several factors should coincide:

1. Regular high-quality miner maintenance
2. Appropriate business model of the mining company
3. Favorable market situation

If at least one of these conditions is not met, the miner works hard at one company until it breaks down or becomes unprofitable. Given the long bearish market phases, three years may turn out to be the profitability limit, when the miner will have to be turned off, or it will completely exhaust its resource, i.e., being flashed for the purpose of the so-called “overclocking”.

One way or another, market cycles and increasing difficulty limit a miner’s active life span to an average of 3 years, and every company, regardless of its capabilities and scale, is looking for ways to reduce costs and maximize the life of rapidly aging equipment.