In this article we review the changes to Bitcoin’s hash rate in 2021. We look at miner difficulty, earnings, and ASIC prices over the past year.
In the second part of this article we discuss bitcoin miner geography in 2021, and provide overviews of the top miner destinations.
Hash Rate Growth
In 2021 Bitcoin’s hash rate grew +20%, from ~150 to 180 EH/s. In comparison, hash rate increased +40% in 2020, from 100 to 150 EH/s. The reason for the stunted hash rate growth last year was a combination of ASIC manufacturing bottlenecks, supply chain holdups, and limited energy availability.
The mining bans in China also had a large affect on Bitcoin’s hash rate in 2021. Below you can see how the bans caused two large dips of the network in blue. The first hash drop was -22% in April. Miners were down one week due coal mine accidents in Xinjiang.
The second dip was -50% between May-June. The cause was twofold. Miners had migrated to Sichuan for the annual wet season, but could not get steady power due to drought. Then bans occurred across the nation, and all Chinese miners disconnected. Read more about the China mining bans and ASIC exodus here.
Miraculously, Bitcoin’s hash rate made a full recovery to the same May-ATH level of ~180 EH/s by December of 2021.
Difficulty
Difficulty grew from 20 to 25 trillion, a +20% increase over the year. This is much less than the +40% overall difficulty increase in 2020.
Remarkably, Bitcoin’s largest ever downward difficulty adjustment of -27.9% occurred in July of 2021, following the mining bans. In 2022 we expect difficulty to near 40 trillion.
BTC Price
BTC’s price increased by a total of +47% in 2021, seen in green above. The price dropped sharply after the mining shutdowns, but had a run again later in the year. Thus, Bitcoin’s price reached two ATHs: $63k in April, then $69k in November.
Interestingly, you can see that difficulty in pink above appears to follow the BTC price with a lag. Indeed, Hal says in 2011 that:
“the computational power of the network is proportional to difficulty; and it appears that difficulty is proportional to bitcoin price. It follows that unless bitcoins become substantially more valuable than they are today.”
In other words, Bitcoin’s volatility should subside over time through adoption, hash rate growth, and the increasing BTC price.
Miner Earnings
The $/TH miner earnings in blue below follow the BTC price. They have gone up nearly 200% in 2021, and had three peaks over 40¢/TH: in April, August, and October. Overall the earnings per TH were between 17-46¢ in 2021, compared to 6-20¢ in 2020.
The sats/TH for 2021 range from around 500 to 1,100, seen in pink below. The largest sats/TH earnings were made in July after the mining bans. In comparison, the sats/TH in 2020 were between 600-2200 per day.
ASIC Prices
ASIC prices in 2021 doubled in $/TH terms, peaking in April-May before the miner migrations. See the blue line below. However, the cost for an ASIC did not follow the $/TH earnings in green, as it has done in previous years.
Between May and July ASIC prices in blue halved due to the BTC drops and mining bans. Thereafter, Bitmain announced they were halting sales of new miners in order to prop up ASIC prices. Thus in the latter part of 2021, ASIC prices were inflated despite BTC price drops, as resellers intentionally kept prices high. This has resulted in some brokers speculating that there is a ‘miner shortage’, but this is not true. It will be very interesting to see what happens to ASIC prices in 2022.
Lastly, the price for an ASIC per BTC was 15-27% over the year. The lowest price per BTC was in February when the first mining bans occurred in Inner Mongolia. And, the highest ASIC per BTC price was in June, just before the Sichuan shutdowns. See the grey columns above.
Furthermore, it is important to note that the price of PSUs and other miner farm components have also risen in 2021, namely due to supply chain issues and inflation.
Miner Migrations
Lastly we provide a little insight on the geography of bitcoin miners, and the top mining destinations in 2021.
Hash Rate Geography
The Cambridge Mining Map became popular last year. The map shows the percentage of miners per country based on IP data from top mining pools, up until August of 2021.
Below you can see how China lost ~80 EH/s from February onwards. Their share went from 53% of Bitcoin’s network to just 0%. On the contrary, North America’s hash rate grew considerably from 11% to 45%. Kazakhstan went from 6% to 18%. And, Russia went from 7% to 11% of the network.
Cambridge Mining Map Bias
The use of private networks, or mining pool stratum addresses on cloud servers, likely caused some country’s hash shares to grow artificially in the Cambridge Mining Map. For example, Ireland and Germany went from 8 EH/s to 11 EH/s, or 6% to 9% of the network. Yet, not a lot of miners are actually located there.
Additionally, mining is still happening in China, so their share is not 0% as the Cambridge data implies. Chinese miners could choose to point their hash to any country via a VPN.
North America
North America has taken the lead share in hash rate this past year by welcoming in up to a million ASICs from China. However, buildouts in the US and Canada, and supply chain issues, mean that some miners are still waiting for rack space. Also, electricity prices have risen, and miner hosting companies are charging 6-13¢/kWh.
Industrial miners have also exploded, and the amount of public mining companies have nearly tripled. In 2021 Western miners placed huge orders with manufacturers Bitmain, MicroBT, and Canaan. America’s ASIC backorders, combined with the global chip shortage, means that miner manufacturing bottlenecks will continue to span this next year.
The region is also encountering a home bitcoin mining boom. The ‘army of the Plebs‘ are spurring ingenious solutions to noise and heat issues that commonly plague home miners. Immersion cooling, soundproof containers, and heat recycling are hot topics in forums.
Kazakhstan
Kazakhstan seemed like a sensible move for Chinese miners. It is just across the north-western border, and has reasonable power prices. The Kazakhs made room for up to a half a million ASICs, until they reached full capacity and had to turn miners away.
Albeit, machine running times were compromised for months in late-2021 due to Kazakhstan’s energy supply issues. And, some illegal farms, as well as farms in the more populated southern regions, were forced to shut. So unfortunately some miners are looking to relocate again. For miners in the north of Kazakhstan however, mining resumes and additional repair centers were opened here in 2021.
Russia
Russia also took in a few hundred thousand miners from China. Most migrated to Siberia, an area rich in hydroelectricity and natural gas. Yet farms are very rural, so shipping takes several weeks.
Like America, miners in Russia also had to wait months to get connected, as farms had to build out capacity to accommodate the influx. Further, it is reportedly difficult for miners to get machines repaired in Moscow at the moment, especially the fragile Antminer 17-series, damaged easily in transit. Given Russia’s surplus of power, we expect their hash rate share to grow in coming years.
Iran
Iran went from a handful of mining farms in 2020, to around 1,000 in 2021. Yet, the country implemented temporary mining bans for two separate periods in 2021, and their total hash rate share fell in the second half of last year. The second ban will last until March of 2022.
The government hopes that mining bans will free up energy, and prevent blackouts. But critics say that banning bitcoin miners does nothing to help Iran to improve its unstable and failing electricity grid. Poor infrastructure is causing the blackouts, not the miners. Alternatively, bitcoin miners could be encouraged to invest in new energy projects, in order to help the country to transition to renewables.
Iranian officials also plan to target small operations and home miners which are ‘unlicensed’ in the coming months and shut them down. There is in fact a large home mining scene in the country. Like the Americans, Iranian home miners design their own custom silencer boxes and immersion cooling setups. And, miner repair centers and resellers populate social media sites.
South East Asia
Due to China’s decision to ban mining, machines will no longer be domestically produced. Most manufacturers will concentrate their operations in South East Asia, namely Malaysia and Thailand.
Malaysia ranks in as a top bitcoin mining destination by Cambridge, and mining is legal here. But, Malaysian officials report they seize thousands of illegal operations per year.
According to police, such ‘illegal operations’ are often at construction sites to drown out noise. Miners steal power and run older gen. machines. When officials discover such mines, they may destroy their seizure. See an example in the shocking video below.
South America
Lastly, miners are gravitating towards Central and South America. Bitfarms are planning a new farm in Argentina, and a build out in Paraguay. Paraguay hope to recruit even more miners to their hydro power sources. Furthermore, Venezuela continues to recruit older gen. machines.
Additionally, El Salvador set up their famous mining operation using geothermal energy. This is exciting considering Iceland, the first country to use geothermal energy for bitcoin mining, has capped bitcoin miner growth. Iceland started turning down farm expansions and new builds from 2021 onwards.
