Comparing Bitcoin Mining Costs Through Standardized Accounting

Summary

The document proposes a three-part framework for estimating the cost to mine a bitcoin. Marginal production cost includes power and hosting; direct cost adds machine depreciation; total cost adds labor. The tiers distinguish the expense of running an operating site from the cost of replacing equipment and the broader cost of the business. The framework is intended to make mining operations more comparable, including when estimates must be reconstructed from public company filings.

The discussion highlights depreciation as a major source of inconsistency. The authors favor a three-year straight-line schedule for their comparisons, while noting that machine life and resale value depend on hardware efficiency, operating conditions, bitcoin prices, network hashrate, and power costs. Their sample of 14 miners had reported schedules ranging from two to seven years, with a median of three. They also describe normalizing EBIT to account for depreciation differences and report average cost estimates across eight miners. The framework remains sensitive to accounting disclosures and assumptions; straight-line depreciation is simple but may not reflect how older machines retain value.

Key ideas

• Mining costs can be separated into marginal, direct, and total production measures.
• Marginal cost covers power and hosting, while direct cost adds equipment depreciation.
• Total cost adds labor and can be estimated from public company expenses and bitcoins mined.
• Depreciation assumptions vary widely and can materially affect reported margins and peer comparisons.
• The proposed three-year depreciation benchmark is a simplifying assumption, not a universal measure of machine life.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.