The hashrate and mining difficulty of Bitcoin (BTC) has steadily climbed through 2023, rising during periods of bullishness, bearishness, and stagnation in the crypto market. An examination of the current state of Bitcoin mining reveals enduring interest despite variable market conditions.

Bitcoin mining involves using computational power to solve complex math problems that verify transactions and enable new blocks to be appended to the Bitcoin blockchain. The individuals and organizations that provide this computing capacity are known as miners. For better efficiency, miners often join together in “pools” to combine their resources into mining pools.

The sustained uptrend in hashrate and difficulty is especially remarkable given the extremely low “Hash Price” currently faced by BTC miners. Hash Price refers to the profits earned by miners on a per terahash basis (a terahash being the standard measure of computing power on the Bitcoin network). It is calculated as a miner's daily revenue divided by the number of terahashes per day. This means miners are presently earning less revenue per unit of computing power and hardware utilization than ever before, yet they continue mining Bitcoin with incredible vigor.

A high hashrate signals a healthy Bitcoin mining environment, with a growing number of miners competing to process transactions and solve the puzzles to earn block rewards. This proof-of-work consensus mechanism secures the Bitcoin blockchain and ensures its integrity. As the hashrate rises, the mining difficulty must also increase to maintain Bitcoin's target of one new block published every 10 minutes.

The trend of expanding hashrate despite declining revenue per terahash implies more efficient mining hardware and operations achieving economies of scale that enable them to run on leaner margins. Major mining pools like Foundry USA, AntPool, and F2Pool control a dominant share of Bitcoin's hashrate distribution.

Upcoming external factors like Bitcoin's approaching halving event in 2024 may also be propelling the forward momentum.

The next Bitcoin halving is expected to take place between April and May 2024, a pivotal milestone known to strongly impact BTC price. Approximately every 4 years, the Bitcoin supply rate is cut in half in a halving event. This reduces the inflation rate and creates upward price pressure on Bitcoin.

At block height 840,000, projected for April 2024, the Bitcoin block reward for successfully mining a new block will decrease from 6.25 coins to just 3.125. This lower rate will persist for another 210,000 blocks or roughly 4 more years.

With miner coin rewards set to halve in around 7 months, miners may be maximizing revenue now aware that earnings could soon decline. Another consideration is that Bitcoin's price has consistently risen after halvings, so accumulating now could pay off long-term based on historical patterns.

In general, price momentum accumulates ahead of a halving and continues surging for months after. As new supply constricts with each event, while demand persists, Bitcoin's verifiable scarcity lifts its value.

Past data shows Bitcoin prices spiking about 6 months following the previous two halvings. After the halvings, total miner revenue in BTC falls, while transaction fees as a percentage of revenue rise.

Higher transaction fee percentages reflect greater demand to utilize the network beyond just the reduced block rewards. Fees increase when more users want to transact on Bitcoin's blockchain and seek miner services. Miners focused on the long-term may accept less revenue now if fees represent a larger portion, signaling a busy network with elevated demand.

Geographic Distribution and Energy Use

The Cambridge Bitcoin Electricity Consumption Index (CBECI) from the Cambridge Centre for Alternative Finance provides ongoing estimates of Bitcoin's energy use and geography using partnerships with mining pools and informed projections.

CBECI recently enhanced its methodology to boost accuracy by simulating daily hardware distributions based on real-world specs. The index currently projects Bitcoin's total annualized consumption at 123.68 terawatt-hours. This metric aligns with total energy expenditure over one year, assuming continuous draw at the present rate.

Although an imperfect comparison, looking at Bitcoin's electricity consumption vs. that of nations provides a relatable benchmark. Bitcoin presently uses more power annually than the Netherlands but less than Argentina.

Per the Cambridge Centre's 3rd Global Crypto Asset study in 2020, approximately 39% of proof-of-work mining operations are currently powered by renewable energy sources.

Based on the latest CBECI data, the United States and China contribute the largest portions of Bitcoin's global hashrate, with the US generating around 37.8% and China 21.1% as of January 2022.

Until 2021, China dominated Bitcoin mining, accounting for 65-70% of global hashrate. But a national ban made all Bitcoin mining illegal, driving China's hashrate contribution to 0% between July and August 2021. It appears many Chinese miners relocated after the crackdown, with hashrate absorbed largely by the US and Kazakhstan.

Rumors suggest some underground Chinese mining continues despite the prohibition by tapping off-grid power and small concealed operations. As the CBECI methodology states, "Access to off-grid electricity and geographically scattered small-scale operations are among the major means used by underground miners to hide their operations from authorities and circumvent the ban."

Exposure Through Ventures Like Delos Digital

Strategic mining firms like Delos Digital B.V. offer exposure to the resilient Bitcoin mining sector. Headquartered in the Netherlands, Delos Digital has deployed successful mining operations in diverse regulatory environments including Russia, China, and Kazakhstan.

Delos Digital consists of two subsidiaries:

• Pantheon Mining - Caters to high-net-worth individuals, family offices, and institutional investors.
• Kodoma - Brings Bitcoin mining to retail investors through fractional ownership facilitated by smart contracts.

Delos Digital currently has operations strategically situated in countries like the UAE, Sweden, Norway, Finland, and Paraguay to solidify global positioning.

Conclusion

Bitcoin's vast computing network continues intensifying with seemingly endless vigor, underscoring the resilience and adaptability of this groundbreaking technology.

Consistency despite fluctuating prices, changing geopolitics, advancing tech, and varying incentives epitomizes the Bitcoin mining landscape. With the upcoming halving drawing near, another dynamic is entering the mix.

As miners acclimate, investors watch with anticipation. For now, the waiting game continues.

Should More Countries Adopt Bitcoin As Legal Tender?

Some proponents argue adopting Bitcoin as legal tender would benefit countries by enhancing financial inclusion and economic sovereignty. Critics counter that volatility, complexity, and links to illicit finance make Bitcoin unsuited to serve as national money. Evidence from early-adopter El Salvador's Bitcoin experiment remains inconclusive so far.

Can Bitcoin Mining Be Made More Environmentally Sustainable?

Transitioning mining to renewable energy sources and improving hardware/energy efficiency could potentially reduce Bitcoin's environmental impact. But some argue Bitcoin's energy-intensive proof-of-work model means it will remain environmentally problematic regardless. Alternatives like proof-of-stake may offer more sustainable consensus mechanisms. However, Bitcoin developers are reluctant to alter a core protocol element like proof-of-work that underpins network security.