Bitcoin mining costs skyrocket! Which will collapse first: hash rate, user experience, or faith?

In this cycle, people’s focus is on corporate Bitcoin reserves, ETF capital inflows, and global liquidity changes. Meanwhile, Bitcoin miners—who are the backbone of the network—have been overlooked. As block rewards decrease and energy costs rise, many miners are forced to pivot into areas like AI hosting, energy arbitrage, and infrastructure services. With only 3.125 BTC earned per block, transaction fees have become the primary driver of miner revenue and network security.

Block Reward Halving and Transaction Fees as the Only Lifeline

(Source: Galaxy Research)

The economic model of Bitcoin mining is undergoing a fundamental shift. Starting after the April 2024 halving, miners will only receive 3.125 BTC per block—a new normal. Before the halving, the reward was 6.25 BTC per block, so this amount has been cut in half. This means miners’ base income drops immediately by 50%, while energy costs, equipment depreciation, and operational expenses remain unchanged.

According to the mempool.space mining dashboard, the average fee per block is about 0.021 BTC, making up only a small part of miner income. Over the past 144 blocks, miners earned roughly 453 BTC in total rewards, which at spot prices (~$101,000 per BTC) amounts to about $45 million. While seemingly large, when distributed across global miners—considering electricity and equipment costs—profit margins are extremely tight.

Derivatives of hash rate pricing indicate that short-term revenue environments will remain constrained. Luxor’s forward curve shows that in October, daily revenue per petahash is around $43, down from $47.25 in late September. This downward trend is concerning, as it suggests the unit economics of Bitcoin mining are deteriorating.

Fee demand remains volatile. After the halving event in April (linked to the launch of Runes), ViaBTC’s halving block earned over 40 BTC from subsidies and fees. Since then, baseline fees have fallen back during the summer. Galaxy Research noted in August that despite price strength, on-chain fees had dropped near historic lows, indicating the fee market is far from stable.

Mining pools further confirm this. Foundry and others sometimes mine transactions paying less than 1 satoshi per virtual byte, indicating that during idle periods, minimum fees can drop significantly. Cheap confirmations can improve user experience during quiet times, though miners’ security budgets are increasingly reliant on fixed subsidies.

The Dead Cross of Energy Costs and Hash Rate Prices

Energy costs are the most direct and ongoing expense in Bitcoin mining. For current generation miners like Bitmain’s Antminer S21 (roughly 17.5 J/TH) and MicroBT’s M66S series (around 18–18.5 J/TH), based on manufacturer specs and typical US electricity rates, the daily electricity cost per petahash is about $20–$30 at $0.05–$0.07 per kWh.

Forward electricity prices are around $43 per petahash/day. Without accounting for operational and capital costs, margins could be very thin. At higher electricity rates (7 cents/kWh), combined with depreciation, rent, labor, and cooling costs, miners’ actual profits could approach zero or turn negative. Moderate electricity prices help sustain marginal power plants, while sustained peaks can be offset by increased cash flow during high-demand periods.

Three Scenarios for Bitcoin Mining Fees

Quiet Period (0.02 BTC/block): Fees account for about 0.6%, with daily security budget around 453 BTC, and hash rate prices increasing by roughly $0.29.

Moderate Period (0.50 BTC/block): Fees make up about 13.8%, daily security budget around 522 BTC, with hash rate prices up by approximately $7.2.

Peak Period (5.00 BTC/block): Fees constitute about 61.5%, daily security budget roughly 1,170 BTC, and hash rate prices increase by about $72.

These scenarios highlight Bitcoin mining’s extreme sensitivity to fee fluctuations. During quiet times, miners rely almost entirely on block subsidies, with minimal profit margins. Moderate fee levels can boost revenue by double digits, while peak periods can reset unit economics, making mining profitable again.

Network Security, the 51% Attack Cost, and the Balance

The security framework depends on two thresholds that translate miner income into attack difficulty. For a 51% attack, operational costs assume attackers can procure and operate hardware at S21 efficiency. Controlling 1.13 ZH/s (enough for a 51% attack, with an energy density of 17.5 J/TH) requires nearly 10.1 GW of power. This translates to roughly 10,085 MW per hour, costing about $50,000–$71,000 per hour at $0.05–$0.07 per kWh.

Based on hardware quantities, the upper limit for a 51% attack can be estimated. To amass the current 51% hash power (~200 TH/s), an attacker would need approximately 288,000 Antminer S21 units, costing around $71 million in hardware alone—excluding facility, electricity contracts, and personnel.

Rising fee levels increase miners’ income, difficulty, and the equilibrium hash rate, which in turn raises operational cost thresholds and attack costs. However, if fees stay low long-term, the network’s security budget effectively shrinks, lowering the cost barrier for potential attacks.

Can Bitcoin Core v28’s Technical Improvements Save the Fee Floor?

Progress has been made here. Bitcoin Core v28 introduces single-parent, single-child relay, allowing nodes to pair low-fee parent transactions with paid child transactions via child-pays-for-parent (CPFP). This reduces the risk of transactions getting stuck and enables miners to profit from otherwise idle block space.

The v3 and TRUC strategies add powerful fee replacement capabilities to limited transaction topologies, alleviating stuck transaction issues and enabling predictable fee adjustments—crucial for Lightning Network channels and batch processing on exchanges. While these changes don’t increase overall demand for printing, they make fee increases more reliable, often establishing a lower bound.

In the short term, with hash rate near 1.13 ZH/s, daily cost per petahash is about $43. Moderate fees are sufficient to keep marginal hash power online, and policy improvements will influence wallet and hash pool behaviors. However, long-term, Bitcoin mining faces three major challenges: centralization risks, balancing user experience and security costs, and ideological beliefs about Bitcoin’s security model. Which will fail first? The answer could determine Bitcoin’s future.