BITCOIN

MINING
SECRETS
INSIDER TIPS
FOR MAXIMUM
PROFITABILITY
03 Part 1:
Introduction

04 Part 2: The three ways to

mine bitcoin

11 Part 3: Minimizing costs

17 Part 4: Mitigating risks

22 Part 5: Maximizing
revenue

30 Part 7: How to evaluate a

bitcoin mining investment

35 Part 6: Choosing the optimal

machine

38 Part 8: How to mine bitcoin

with Hashlabs
PART 1:
INTRODUCTION
Thank you for downloading Bitcoin Mining Secrets, our comprehensive guide is
crafted to give you the confidence needed to navigate the complex world of Bitcoin
mining. Mining can seem overwhelming, with its intricate processes and ever-
evolving landscape, but we aim to simplify that journey for you.

This guide is tailored specifically for beginners and intermediate miners, equipping
you with the knowledge and strategies needed to succeed in bitcoin mining. Unlike
most other guides, we won’t focus on the technical explanations of what bitcoin
mining is. Instead, our goal is to provide you with practical insights and actionable
knowledge that you can use to gain a competitive edge in the mining industry.

Here’s what you can expect:

The Three Ways to Mine Bitcoin: First, we’ll explain the three main
approaches—self-mining, hosting, and cloud mining—so you can evaluate the
options and choose the best structure for your mining investment.
Cost Minimization: Next, we’ll guide you on how to keep your mining costs
low, a critical factor in maximizing profitability. You’ll also gain an
understanding of the cost structure of bitcoin mining.
Risk Mitigation: Managing risk is vital to long-term success. We’ll share
strategies to identify and mitigate the specific risks involved in bitcoin mining,
ensuring you make informed, safe decisions.
Maximizing Revenue: We’ll then cover how to enhance your mining revenue
by optimizing your operations.
Choosing the Right Mining Machine: With numerous machines on the market,
we’ll introduce a four-part framework to help you select the best model for
your needs, keeping performance and cost-efficiency in mind.
Mining with Hashlabs: Finally, you’ll learn how bitcoin mining works with
Hashlabs and what to expect when partnering with us, making the process
clear and straightforward.

We hope this guide equips you with the knowledge and confidence you need to
embark on a profitable mining journey!

03
 PART 2: THE THREE WAYS
TO MINE BITCOIN

There are three primary ways to mine bitcoin, each varying in the level of outsourcing
involved. Understanding these differences is key to determining the best approach
for your mining journey.

In this section, we will explore these three methods—self-mining, cloud mining, and
hosting—giving you a clearer understanding of the options available as you work
toward becoming a professional bitcoin miner.

04
Self-Mining

Self-mining is the most complex yet potentially most profitable

way to mine Bitcoin, as it requires managing every aspect—from
sourcing machines and purchasing electricity to configuring and
maintaining the equipment.

Although self-mining allows full control over costs, it comes with

significant challenges. The process is highly time-consuming and
difficult to manage alone. If you have access to low residential
electricity rates, running a few machines at home might be
feasible. However, keep in mind that mining machines generate
significant noise and require constant monitoring to ensure
consistent uptime.

05
As bitcoin mining becomes increasingly competitive, few individuals possess the
combination of low electricity rates, technical skills, and the time commitment
necessary for self-mining to be viable.

For most investors, it is more practical to outsource the operation to professionals

who have access to cheaper electricity and are fully dedicated to mining. This can be
done by hosting your machines with a provider, or by investing in a larger self-mining
setup.

If you are a larger investor looking to commit several million dollars to mining,
companies like Hashlabs can design and manage a self-mining operation tailored to
your specific requirements. However, if your budget is more modest, we recommend
considering the hosting model, which offers a cost-effective alternative. We will
discuss this approach in detail in the following sections.

Pros of Self-Mining: Cons of Self-Mining:

Potentially the most lucrative Highly complicated and

way to mine bitcoin. requires significant technical
expertise.
Full control over the entire
operation, including costs, Time-consuming, as constant
equipment, and maintenance. monitoring and maintenance
are essential.

You may not have access to

sufficiently cheap electricity
to make it cost-effective.

Capital intensive, requiring

investment not only in mining
machines but also in ancillary
equipment and infrastructure.

06
Cloud mining and hashrate tokens

Cloud mining and hashrate tokens offer the simplest way to mine bitcoin, but they
also come with significant risks and are typically the least profitable option. As with
any packaged product, the more convenient it is, the higher the price—cloud mining is
no exception.

When investing in cloud mining, you don't own specific bitcoin mining machines.
Instead, you're entitled to a certain amount of hashrate for a set period. Cloud mining
was highly popular among bitcoin investors a few years ago but has since declined
due to numerous scams and fraudulent schemes.

07
More recently, hashrate tokens have emerged as a replacement for cloud mining
among retail clients. Similar to cloud mining, these tokens provide the holder with
rights to a specific amount of hashrate. The key advantage of hashrate tokens
compared to cloud mining certificates is their liquidity, as they can be traded on
cryptocurrency exchanges.

We generally do not recommend cloud mining or hashrate tokens due to the

associated risks and limited profitability. However, if you decide to pursue these
options, we strongly advise working only with reputable and well-known providers.

Pros of Cloud Mining and Pros of Cloud Mining and

Hashrate Tokens: Hashrate Tokens:

The simplest and most Historically prone to scams

convenient way to mine and fraud.
bitcoin.
Generally offer the lowest
Hashrate tokens offer some potential profitability
liquidity, as they can be traded compared to other mining
on cryptocurrency exchanges. investment options.

Hosting

Hosting represents a balanced approach between self-mining and cloud mining in

terms of complexity and profit potential. It is sufficiently straightforward for most
investors to manage, while offering more oversight and greater profit potential
compared to cloud mining.

In our view, hosting is the best of both worlds for most bitcoin mining investors. It
simplifies some of the complexities associated with self-mining while providing low
operational costs conducive to profitable mining.

08
In a hosting arrangement, you purchase and own specific mining
machines while contracting with a hosting provider to manage and
operate them on your behalf. You pay the hosting provider a
monthly hosting fee, which covers the management and
operational costs of your machines. In return, the hosting provider
ensures the efficient operation of your equipment. Your machines
are connected to your mining pool account, allowing you to receive
all the bitcoin they mine directly.

The hosting fee is typically based on kilowatt-hours (kWh),

meaning you only pay for the actual electricity consumed by your
machines. This makes it straightforward to calculate your monthly
hosting bill.

09
One of the main advantages of hosting is that you only need to invest in the
machines themselves, without having to worry about the ancillary infrastructure. The
hosting provider is responsible for building and maintaining the necessary
infrastructure to ensure your machines operate efficiently, as well as sourcing
electricity at competitive rates.

Choosing the right hosting provider is critical, as many unreliable options exist. You
will be entrusting a third party with your assets and relying on them to maximize their
utilization. Therefore, it’s essential to conduct thorough due diligence on the
company and its team. Here’s a checklist to help you evaluate potential providers:

Does this company have a good reputation?

Is the company and its team transparent in their operations?

Do they demonstrate professionalism during the onboarding process?

Do I have a positive gut feeling about this company and its representatives?

If the hosting provider meets all these criteria, you can confidently decide whether to
move forward with them for your hosting needs.

In this guide, we will primarily focus on the hosting model, as this is the area where
Hashlabs has the most expertise.

Pros of Hosting: Cons of Hosting:

Relatively low complexity Some hosting providers may

compared to self-mining. be unreliable, so careful
vetting is essential.
Offers good profit potential
with a well-structured setup. Limited control over the
management of the machines,
Generally transparent if you as this is handled by the
choose a reputable provider. hosting provider.

10
PART 3:
MINIMIZING COSTS
In the previous section, we outlined the three main models of bitcoin mining. In this
section, we will focus on how to minimize the costs associated with two of these
models: self-mining and hosting.

We will begin by explaining the underlying cost structure of the bitcoin mining
industry, followed by guidance on what constitutes an ideal operating cost.

The cost structure of bitcoin mining

Bitcoin mining is a highly competitive industry where success hinges on achieving

lower costs and higher operational efficiency compared to your competitors.

The illustration below highlights the cost structure of a bitcoin mining operation. As
shown, the largest cost is electricity, with other significant cost items being other
operational expenses (such as salaries for site personnel), depreciation of the mining
site, and depreciation of mining machines.

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Electricity costs form a significant portion of the total expenses in Bitcoin mining,
which is why costs are often expressed on a per-kilowatt-hour (kWh) basis. The goal
for any miner is to generate enough revenue per kWh to cover the hosting fee (the
cost of running the facility) and still yield a healthy return on their investment in the
mining machines.

The primary distinction between self-mining and hosted mining lies in how these
costs are managed. In a self-mining operation, the miner directly pays for each
expense: the electricity bill, operational costs, and the capital expenditure for the
mining site.

Hosted miners, on the other hand, are relieved of managing these individual
expenses. They pay a fixed hosting fee to the provider, who oversees the entire
mining operation. This simplification is represented in the illustration above.

Therefore, a hosted bitcoin miner only needs to account for two main cost elements:

1. The hosting fee, typically based on kWh usage.

2. Depreciation of the mining machines, which should be offset by the

difference between revenue per kWh and the hosting fee.

You must survive the bear to enjoy the bull

In the previous section, we introduced the cost structure of the bitcoin mining
industry. However, one critical question remains: how do you ensure that your costs
are low enough to achieve long-term profitability? This section will explore that
question.

First, it's important to note that Bitcoin mining is a highly cyclical industry, marked by
periods of tremendous highs and deep lows. In this respect, it resembles traditional
commodity industries like oil and gold production.

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As with all cyclical industries, there will be major winners and losers. To position
yourself as a winner, two key principles must be followed:

1. Enter the market at the right time, when machine prices are low.

2. Minimize costs to ensure long-term survival.

The objective in mining is to generate substantial profits during bull markets

(principle 1). However, to reach that point, you must keep your costs low enough to
withstand the inevitable downturns of bear markets (principle 2).

While timing the market can be challenging, one valuable piece of advice comes
from our friend Warren Buffett: "Be fearful when others are greedy, and greedy when
others are fearful.” This mindset is essential in navigating the cycles of bitcoin
mining.

The chart below offers key insights for both market timing and determining the cost
levels needed for long-term survival. It illustrates the historical revenue per kWh for
bitcoin mining, based on the most efficient machine available at any given point in
time.

13
The chart above reveals two important insights. First, it highlights the significant
cyclicality of the Bitcoin mining industry. Since 2019, we’ve observed three periods of
rising profitability, each followed by distinct phases of limited profitability. We are
currently in one of these low-profitability periods. Historically, following Warren
Buffett’s advice to invest countercyclically—when profitability is low—has proven to
be the best strategy for generating substantial returns in Bitcoin mining. Therefore,
we recommend increasing investments during market downturns and scaling back
during bull markets when machine prices are inflated.

The second insight from the chart relates to the maximum long-term viable hosting
fee. To maintain a cash flow positive operation, the revenue per kWh generated by
your machines must exceed your hosting cost per kWh. The chart shows that the
lowest revenue per kWh from the most efficient machine has been $0.089/kWh.
While you could theoretically set your cost level at that point if you always use the
latest-generation machine, we advise against it for two reasons:

1. It's important to maintain a margin of safety, as future bear markets

could be harsher than previous ones.

2. New machines are frequently released, meaning your current

machine may soon be less efficient than newer models.

14
To mitigate risk, we recommend securing a hosting rate that does not exceed 80% of
the historical minimum revenue per kWh, which is $0.089. This translates to a
maximum hosting rate of $0.071/kWh. Hosting rates above this level may not be low
enough to ensure sustainable operations during future bear markets.

Additionally, if you're operating a less efficient machine that generates lower revenue
per kWh, it is recommended to secure a lower hosting rate. In general, the less
efficient the machine, the lower your hosting rate should be. We will discuss this
further in Section 6, where we guide you on selecting the optimal machine for your
needs.

How to minimize costs as a hosted miner

In the previous section, we discussed the importance of minimizing costs as a

Bitcoin miner by securing a low hosting rate. Now, let’s explore how you can achieve
this.

While obtaining hosting rates below the key threshold of $0.071/kWh can be
challenging, given that the current average in the United States is $0.076/kWh, it is
still possible. This is achievable unless the hosting market is experiencing
particularly tight conditions, which often occur during bull markets.

There are four primary ways to secure a favorable hosting rate:

1 Taking Country Risk

Hosting in countries with less stable political or economic environments can offer
lower rates, though it may involve greater risks. For example, countries perceived as
risky, such as Ethiopia, provide extremely cheap hosting options, while countries
considered less risky, like the United States, tend to offer more expensive hosting
services.

2 Accepting Lower Quality

Choosing hosting services with less sophisticated infrastructure or support can lead
to cost savings, but it may also affect performance and reliability. Here, quality
encompasses factors such as uptime, customer support, the way the hosting
provider manages your machines, and the overall trustworthiness of the provider.
Like any service, premium hosting solutions typically carry a higher price tag than
their average counterparts.

15
 3 Economies of Scale

Larger miners can capitalize on their size to negotiate better rates based on the
volume of their operations. This principle applies to the pricing of any good or
service: the more you purchase, the more leverage you have to secure favorable
prices.

4 Using Relationships

Utilizing personal or business relationships with hosting providers can help secure
more competitive rates, especially in tighter markets. At Hashlabs, we frequently
extend special offers to our existing customers, highlighting the value of fostering a
strong, long-term relationship with your hosting provider.

As previously discussed, the hosting rate is one of two cost components for a hosted
miner, with the other being the depreciation of the mining machines. To reduce the
depreciation of your equipment, it is crucial to focus on obtaining the best possible
purchase price for the machines. In Section 6, we will outline strategies to help you
achieve this.

Hashrate Index Q2 2024 Report: The New Normal

Having learned how to minimize your costs as a hosted Bitcoin miner and
established your cost targets, you are now ready to explore the next vital aspect of
your bitcoin mining journey: risk mitigation, which we will detail in the following
section.

16
 PART 4: MITIGATING RISKS

An essential yet often overlooked aspect of successful Bitcoin mining is risk

mitigation. In this section, we will outline the most significant risks associated with
Bitcoin mining and provide high-level guidance on how to effectively mitigate them.
Risks in bitcoin mining and how to mitigate them

Falling bitcoin mining revenues

In Section 5, we will explore the various factors that impact Bitcoin mining
revenue. Overall, as a miner, you have limited control over your earnings,
which presents a significant risk. Additionally, as discussed in the previous
section, the Bitcoin mining industry is highly cyclical, often experiencing
fluctuations in profitability. This cyclical nature represents the biggest risk in
Bitcoin mining.

Strategies to mitigate the risk of falling bitcoin mining revenues:

Derivatives: You can lock in your future revenues by utilizing derivatives

contracts from companies like Luxor.

Cost Minimization: By focusing on reducing costs, you can ensure that

your operational expenses remain low enough to withstand challenging
market conditions.

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Rising electricity prices

Rising electricity costs will directly impact your production

expenses, representing one of the biggest risks in the mining
process. This risk is considered idiosyncratic, as it is largely
outside your control as a miner; instead, it is determined by the
supply and demand dynamics within the local electricity market.

Strategies to mitigate the risk of rising electricity prices:

Long-term hosting contracts: If you have only a one-year

contract with your hosting provider, there is a risk that they
may increase your rates once that term expires. To mitigate
this risk, we generally recommend signing long-term hosting
contracts of three years or more. This approach ensures that
you can maintain your pricing for the foreseeable future,
providing greater stability and predictability in your operating
costs.

Hosting provider has long-term PPA: If your hosting provider

has a long-term fixed-price power purchase agreement (PPA),
they should be able to honor their contract and maintain the
agreed-upon hosting rate. Conversely, if they do not have such
an

Luxor Derivatives

agreement, there is a risk that your hosting provider may need to

raise your rates if their electricity costs increase. Therefore, we
recommend signing up for hosting services only with providers
that have a long-term fixed-price PPA in place. This ensures
greater stability in your hosting costs.

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Weakened access to electricity

In certain situations, a hosting provider may need to curtail operations—

periodically turning off services—due to supply-demand imbalances on the
electric grid. This is particularly common in volatile electricity markets like
Texas. Generally, if such curtailments do not significantly impact your long-
term uptime, they are not a major concern. However, if these interruptions
persist for an extended period and lead to poor uptime (below 95%), it
becomes a problem that should be avoided.

Strategies to mitigate the risk of weakened access to electricity:

Avoiding off-grid mining: While off-grid mining, where you are directly
connected to a power plant, can offer lower costs and other advantages,
it also carries a higher risk of weakened access to electricity due to
reliance on a single power producer.

Avoiding volatile electricity markets: Markets such as Texas may provide

very cheap power prices, but they often experience curtailment issues. It's
essential to consider the stability of electricity access in these regions
before making a decision.

Avoiding developing countries: In developing countries, electricity

systems tend to be volatile and underdeveloped, leading to numerous
potential issues. While these regions may offer cheaper electricity, they
also come with significant risks, including unreliable access to power.

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Natural disasters

While it’s easy to dismiss the likelihood of a natural disaster occurring, the reality is
that such events can and do happen. For instance, a few years ago, a massive
mudslide in China destroyed an entire Bitcoin mining facility. To protect your
investment, it's crucial to take precautions to prevent similar disasters from
impacting your machines.

Strategies to mitigate the risk of natural disasters:

Insurance: You can insure your machines against natural disasters, which is a
prudent step if your equipment is located in an area prone to such events.

Avoiding natural disaster-prone locations: The most straightforward way to

mitigate the risk of natural disasters is to operate in areas where such events are
extremely rare, such as Norway.

Machine theft or confiscation

While machine theft or confiscation is relatively uncommon, it is still a possibility.

Although the likelihood of such incidents is low—most miners never encounter this
issue—the economic impact can be significant. Therefore, it is essential to take this
risk seriously and implement measures to safeguard your equipment.

Strategies to mitigate the risk of machine theft or confiscation:

Security measures: Ensuring physical security is essential both during the

transport of your machines and after they arrive at the facility. Having guards on-
site and implementing various security measures is crucial for protecting your
equipment. Additionally, shipping should be closely monitored and insured to
mitigate potential risks. A reputable hosting provider will take the security of your
machines very seriously, ensuring that all necessary precautions are in place.

Operating in safe countries: To minimize this risk, the simplest solution is to

locate your machines in stable and secure countries, such as Norway or Finland.
These nations typically offer a safer environment for your equipment, reducing
the likelihood of theft or other security concerns.

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Machines breaking down

Like any machinery, Bitcoin mining machines are susceptible to failures. If

you operate a substantial number of machines, it is inevitable that some will
eventually break down. You only have a problem if a significant portion of
your machines fails simultaneously. Fortunately, there are ways to mitigate
this risk, which we will explain next.

Strategies to mitigate the risk of machines breaking down:

Buying from the most reputable brands: In general, MicroBT machines are
known for their low failure rates and longer lifespan compared to those of
their competitors.

Buying machines with warranty: Most machines come with a one-year

warranty from the manufacturer. By purchasing new machines, you
benefit from this warranty, which provides assurance that you can replace
any units that arrive in poor condition.

Avoiding certain batches: Certain batches of specific models may

experience higher failure rates than others. Based on our experience, the
risk associated with purchasing the first batch of a machine is typically
greater than that of acquiring later batches.

We have outlined the key risks in Bitcoin mining and how to mitigate them.
Effective risk management is essential for success; by implementing the right
strategies, you can significantly reduce your risks. However, it's important to
recognize that some level of risk will always exist in mining. Remember, there
is no free lunch—good returns require accepting certain risks, but you should
aim to mitigate those you can control.

21
PART 5:
MAXIMIZING REVENUE
So far in this guide, we have covered strategies for minimizing costs and mitigating
risks. Now, we will explore the third lever for optimizing your Bitcoin mining
operation: maximizing revenue. Before diving into that, we will first discuss the
factors that impact the global Bitcoin mining market, as your revenue is significantly
influenced by these elements.

Factors impacting the global bitcoin mining revenue

While you can employ various strategies to manage costs and reduce risks, a
substantial part of your revenue is dictated by market forces beyond your control. We
will now highlight these external factors and the key metrics essential for tracking
your Bitcoin mining revenue.

There are two critical concepts to understand regarding Bitcoin mining revenue: the
daily industry revenue, which represents the total earnings across the entire mining
industry, and the daily revenue per unit of hashrate, also known as the hashprice. We
will now explain these factors in more detail.

Bitcoin mining machines generate hashrate, which is then converted into revenue,
either in Bitcoin or USD. The most effective metric for tracking revenue in the
industry is the revenue per unit of hashrate per day, commonly referred to as
hashprice. Hashprice is measured in USD per petahash (PH/s) per day.

For example, if you own an Antminer S21 XP with a hashrate of 270 TH/s (0.27 PH/s)
and the current hashprice is $45.62, your daily revenue would be approximately
$12.32 (calculated by multiplying 0.27 PH/s by $45.62). Additionally, if you operate
1,000 of these machines, your daily revenue would be around $12,320.

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As we can see, three main factors influence your revenue: the number of machines
you own, the hashrate each machine generates, and the hashprice. While you have
control over the first two factors, the hashprice is beyond your control as it is
determined by market forces. Next, we will dive deeper into the components that
make up the hashprice.

We will now further break down the hashprice, explaining each element in how it is
built up.

The block subsidy is the fixed reward miners receive for successfully adding a new
block to the Bitcoin blockchain. It consists of newly minted bitcoins and represents a
significant portion of miner revenue. This subsidy decreases over time through an
event called the "halving," which happens roughly every four years, cutting the reward
in half. Initially 50 BTC per block, the current subsidy stands at 3.125 BTC and will
continue to decrease until Bitcoin's total supply of 21 million is reached.

23
The chart above illustrates the amount of bitcoin mined per day, broken down by the
block subsidy and transaction fees. Two key insights can be drawn from this. First, it
clearly shows the halving of the block subsidy every four years. Second, it highlights
that, so far, transaction fees have only contributed a small portion to miners' overall
revenue, with occasional spikes during periods of high network demand.

Over the past two years, transaction fees have become more volatile, driven by
increased experimentation with token issuance on Bitcoin, similar to what has long
been common on Ethereum. This new activity suggests that fees may continue to
rise in the coming years.

We believe it's only a matter of time before transaction fees become a more
significant revenue stream for miners. Initially, this will likely be driven by new non-
monetary transaction types, while more substantial demand could emerge later as
Bitcoin is used to settle international commodity transactions. For a deeper dive into
our views on this topic, you can explore our transaction fee series.

In 2024, the average daily global mining revenue has been approximately 687 bitcoin.
This represents the total pool of rewards that miners worldwide are competing for
each day.

24
As explained earlier, a miner generates hashrate, and this hashrate determines the
miner’s share of the total reward pool. For instance, if a miner generates 1% of
Bitcoin’s total hashrate, they can expect to earn 1% of the total daily rewards. Given
that the total rewards issued per day are 687 bitcoin, a miner with 1% of the
network's hashrate can anticipate earning 6.87 bitcoin per day (687 bitcoin multiplied
by 1%).

In practice, network difficulty determines a miner’s likelihood of solving a block. As

the network difficulty increases, a miner needs to generate more hashrate to
successfully solve a block, and vice versa. Therefore, network difficulty is inversely
correlated with individual Bitcoin mining revenue (hashprice)—the higher the
difficulty, the lower the hashprice, and the lower the difficulty, the higher the
hashprice.

The chart above illustrates the historical relationship between Bitcoin’s total
hashrate and network difficulty. As seen, there is a very close correlation between
these two variables. This relationship exists because network difficulty is adjusted
approximately every two weeks based on the total hashrate, ensuring an average
block time of about 10 minutes.

25
As more bitcoin miners join the network and the total hashrate increases, network
difficulty also rises. This, in turn, reduces the likelihood of any single unit of hashrate
successfully solving a block. In simple terms, as a miner, you prefer fewer miners
online because an increase in total hashrate decreases your share of the overall
rewards. However, as shown in the chart, it is nearly inevitable that total hashrate will
continue to grow over time.

The final factor influencing your mining revenue is the bitcoin price. As previously
mentioned, there is a total pool of rewards composed of the block subsidy and
transaction fees, which are distributed to miners according to their share of the total
hashrate. Since this pool is denominated in bitcoin, a higher Bitcoin price increases
the overall value of this reward pool. Consequently, as the price of Bitcoin rises, the
value of the rewards received by miners also increases.

As you may already be aware, Bitcoin's price has historically experienced a

significant upward trend, occasionally interrupted by deep bear markets. While we
aren't traders and cannot predict short- to medium-term price movements, we
believe it is likely that the overall trend will continue to be upward.

26
Historically, the price of Bitcoin has had the most substantial impact on individual
mining revenue (hashprice). As the price rises, so does the value of the rewards
miners receive, making it a crucial factor in overall profitability.

In summary, the key metric to track your Bitcoin mining revenue is the hashprice,
which is influenced by four primary factors: the block subsidy, transaction fees,
network difficulty, and Bitcoin price. With this understanding, you are equipped to
monitor your Bitcoin mining revenue effectively and identify the crucial factors that
can impact your profitability.

Before we conclude this sub-chapter, let’s examine the historical behavior of

hashprice. Understanding its trends and fluctuations over time can provide valuable
insights into how the various influencing factors have interacted and affected mining
revenue.

The chart above illustrates the development of hashprice since 2020. As shown, it
has generally followed a downward trend, with notable interruptions during the
massive mining bull market in 2021 and a few occasional spikes.

27
This overall decline in hashprice is primarily due to the consistent increase in
network difficulty, as discussed earlier in this sub-chapter.

The 2021 mining bull market was driven by two main factors: 1) a dramatic rise in
Bitcoin's price and 2) a decrease in difficulty resulting from a significant amount of
hashrate going offline in China following the country’s ban on Bitcoin mining. This
combination of rising Bitcoin prices and reduced difficulty resulted in skyrocketing
hashprice and substantial profits for miners in 2021.

Since then, Bitcoin mining profitability has been relatively subdued, punctuated by
sporadic spikes driven by the volatility of transaction fees, as mentioned earlier.

However, as we discussed in Section 3, Bitcoin mining can occasionally be highly

profitable. The key is to maintain sufficiently low costs, enabling you to capitalize on
the lucrative opportunities that arise during periods of surging hashprice. By
effectively managing your expenses, you can maximize your profits when market
conditions favor miners.

How to maximize your bitcoin mining revenue

To maximize your revenue, you need to focus on two main objectives. First,
aim to generate the highest possible hashrate, as this hashrate is ultimately
what you will convert into Bitcoin. Second, implement an effective
mechanism for liquidating your hashrate into actual Bitcoin. Let's delve into
these two aspects further.

Maximizing your hashrate

The most direct way to increase your Bitcoin mining revenue is to generate
more hashrate. How can you achieve that? There are two main options: you
can either buy more Bitcoin mining machines or purchase more powerful
ones.

Let’s examine how your revenue correlates with the number of machines you
own. As of today (October 14, 2024), the hashprice is $46.20 per PH/s. This
means that for every PH/s of capacity you operate, you stand to generate
approximately $46.20 worth of Bitcoin. The most powerful air-cooled Bitcoin
mining machine currently available, the Antminer S21 XP, generates 270
TH/s (or 0.27 PH/s).

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Therefore, if you own just one of these machines, you can expect to generate around
$12.47 worth of Bitcoin per day (0.27 PH/s multiplied by $46.20).

The second method to increase your hashrate is by purchasing machines with higher
hashrate capabilities. There is a significant gap between the hashrate of different
models. For example, the Antminer S19K Pro generates 115 TH/s, while some hydro-
cooled models, such as the WhatsMiner M63S, can produce over 400 TH/s.

In Part 6 of this guide, we will explore how to select the optimal machine for your
needs.

Choosing the correct mining pool

All your revenues will pass through a mining pool, so choosing the right one is
crucial! Many miners mistakenly believe that the choice of mining pool doesn’t
matter, but this couldn’t be further from the truth. Some mining pools consistently
pay out significantly more than others.

What is a mining pool? Simply put, a mining pool is the buyer of your hashrate.
Mining pools typically pay close to market rates for your hashrate, as determined by
the hashprice we discussed earlier. They aggregate hashrate from numerous miners,
using it to solve blocks and generate Bitcoin.

Why use a mining pool? As explained in the previous section, your chances of solving
a block—and thus earning Bitcoin—are directly tied to your share of the global
hashrate. Unless you control a significant portion of that global hashrate, your
chances of solving a block on your own are minimal. Mining pools allow you to share
the rewards based on the hashrate you contribute, ensuring a steady income stream.

While mining pools generally pay close to market rates, this is not always the case. In
our tests, we found considerable differences in payout rates among various mining
pools, with some paying significantly more than others.

As of today, we recommend using Nicehash, which has consistently paid 3% to 7%

more than other mining pools in all the tests we’ve conducted.

In the competitive world of Bitcoin mining, a 3% to 7% boost in revenue can make a

substantial difference to your profitability.

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 PART 6: CHOOSING THE
OPTIMAL MACHINE
So far in this guide, you've learned the importance of cost minimization, risk
mitigation, and revenue maximization in Bitcoin mining. Now, we will cover perhaps
the most critical aspect—how to choose the optimal Bitcoin mining machine.

In this section, we will introduce a framework to help you select the best Bitcoin
mining machine for your specific needs. This framework is based on four key
factors: efficiency, hashrate, durability, and price. Let’s take a closer look at each
factor.

Factor 1: Efficiency
A Bitcoin mining machine transforms electrical inputs into hashrate outputs. Similar
to any machinery used in a production process, the key to success is achieving
maximum output with minimal input. In Bitcoin mining, this translates to maximizing
the efficiency of your machine.

Efficiency is measured in joules per terahash (J/TH), and it is a critical factor when
selecting a mining machine. The more efficient your machine, the less electricity
you’ll need to generate a given amount of hashrate. As a result, higher efficiency
translates into lower operating costs and improved gross margins.

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As illustrated in the chart below, more efficient machines can produce Bitcoin at a
lower cost, offering a significant advantage in profitability.

Assuming a hosting fee of $0.07/kWh, which we offer in Norway and Finland, the
Antminer S21 XP achieves an exceptionally low Bitcoin production cost of just $29k.
With the current Bitcoin price at $63.3k, this machine delivers a strong gross margin
of 54%. Other highly efficient models, such as the Antminer S21 Pro, Antminer S21,
and WhatsMiner M63S, also maintain solid gross margins due to their superior
efficiencies.

As the chart above illustrates, at an electricity cost of $0.07/kWh, it is advisable to

choose a machine with an efficiency of 20 J/TH or better to ensure cost-effective
Bitcoin production. Based on our experience, we recommend selecting a machine
that consistently delivers a gross margin of at least 40%.

However, keep in mind that higher efficiency machines often come with a higher
price tag.

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Factor 2: Hashrate

When acquiring a Bitcoin mining machine, you're essentially investing in its hashrate,
which represents the computational power it will deliver over its operational lifespan.
Since the machine’s sole function is mining, its value is entirely tied to the hashrate it
can generate. This is reflected in ASIC prices, which are typically measured in dollars
per terahash ($/TH).

In the preceding section, we emphasized the critical importance of efficiency. A

close second in significance is the hashrate—the machine’s output. A higher
hashrate is inherently beneficial, as it directly boosts your mining revenue, as
explained earlier.

The ten most hashrate-dense machines are all specifically designed for hydro- or
immersion cooling. Among air-cooled machines, the Antminer S21 XP stands out
with a hashrate of 270 TH/s.

Given the current market conditions as of October 2024, we recommend choosing an

ASIC miner with a minimum hashrate of 120 TH/s, though ideally, you should aim for
a machine delivering 200 TH/s or more.

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Factor 3: Durability

Ensuring a longer lifespan for your miner is crucial, as it directly correlates with
the amount of bitcoin it can mine over time. Therefore, when selecting a model,
it's essential to take into account the machine's proposed durability.

Predicting a new model's durability in advance can be challenging as practical

testing is often necessary. Waiting before purchasing new models means that
others can test them for you first, providing insights into potential faults.
However, some issues may only surface after the first few months of
operation.

It's worth noting that the initial batch of a model might have higher failure rates
compared to later batches. Manufacturers, having tested machines at scale
with end-users, can address and rectify small errors over time. Hence, caution
is advised when considering the purchase of the first batch of a machine.

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Historically, certain machines have exhibited higher failure rates and poorer durability
than others. For instance, within the Bitmain models, the S9 was well-regarded,
whereas the S17 faced significant issues. Subsequently, the S19 series performed
exceptionally well and continues to do so more than four years after its release.

In terms of reputation for durability, MicroBT's WhatsMiner generally outshines

Bitmain's Antminer and Canaan's Avalon. When opting for a new and untested
machine, WhatsMiner is often considered a safer choice than Antminer due to its
robust construction, longevity, and performance in various ambient environments.

In summary, durability is a crucial yet sometimes overlooked factor in the machine

selection process. An ideal miner should have a long lifespan, enabling extended use
for bitcoin generation or potential resale after a few years.

Factor 4: Price

When purchasing anything, maximizing the value for your investment is essential.
Minimizing capital expenditure allows for the acquisition of more machines or more
hashrate. Therefore, the goal is always to minimize the price paid for a machine.

The price of ASICs is commonly measured in USD per terahash ($/TH), enabling the
comparison of prices across models with different hashrates. The true value of an
ASIC lies in its ability to generate hashrate, making it crucial to seek a high hashrate
capacity per dollar spent.

Prices for different models vary based on factors mentioned earlier in this section,
such as hashrate, efficiency, and durability, with machines typically priced on a days-
to-payback basis.

It's important to recognize that, similar to any other purchase, paying the highest
price doesn't necessarily equate to the most value. Two key questions to consider
regarding machine price are: 1) "How much value do I need, and are there features I
don't require?" and 2) "Is this particular model overpriced?" Opting for a less efficient
but less expensive model can often result in significantly higher returns on
investment.

In the next section, we will guide you through conducting a return on investment
(ROI) analysis to help you better decide which machine you should purchase and
how you should operate it.

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PART 7: HOW TO EVALUATE A
BITCOIN MINING INVESTMENT
So far in this guide you have learned about four key factors that you must consider
when mining bitcoin: cost minimization, risk mitigation, revenue maximization, and
how to pick the correct machine. All well and good, but how do you put these factors
together into an investment analysis? We will explain that in this section.

Using the payback period to evaluate returns

When purchasing Bitcoin mining machines, it's essential to approach them as an

investment—you're putting down capital now with the expectation of generating
more money in the future. Like any investment, it's crucial to conduct an investment
analysis to project potential returns and understand how various factors may impact
them.

The methodology for investment analysis in Bitcoin mining is similar to other

sectors, with one key difference. In more stable and mature industries, the internal
rate of return (IRR) is often used as the standard metric. Investors typically set a
target return, say 15%, and if the projected return exceeds this target, the investment
is deemed viable.

However, Bitcoin mining is highly volatile and risky, making the IRR less relevant.
Instead, the focus shifts to recouping the investment quickly due to high risks and
capital costs. In this industry, the best metric to evaluate your investment is the
payback period—the time it takes to recover your initial investment. This approach
helps you mitigate risk and plan for profitability in a fast-changing environment.

35
The payback period shows how many months it will take to recoup your initial
investment in Bitcoin mining machines. This simple and straightforward metric
aligns well with a miner’s primary goal of achieving a high return on investment
quickly, especially given the volatile nature of the Bitcoin mining industry.

Because Bitcoin mining is so unpredictable and difficult to model accurately, we

recommend keeping your projections simple and avoiding over-reliance on future
assumptions.

Our preferred approach is as follows:

1. Calculate the total investment: First, calculate how much you are looking to invest
in the machines.

2. Calculate your daily revenue: You then estimate the daily revenue of your
machines by multiplying the hashprice by your hashrate.

3. Calculate your daily cost: After that, you calculate your daily cost by multiplying
their daily electricity consumption in kWh by your cost per kWh.

4. Calculate the monthly cash flow: You subtract the daily cost from the daily
revenue to get your daily cash flow. You then multiply this number by 30.4 (the
average number of days in a month) to get your monthly cash flow.

36
5. Determine the Payback Period: Finally, divide your initial investment by the
monthly cash flow. This gives you the payback period—the number of months it will
take to recover your investment, assuming market conditions remain relatively
stable.

By focusing on the payback period, you can evaluate the return on your mining
investment without relying too heavily on uncertain future projections.

Now that you know how to calculate the payback period, the next question is: What
payback period should you aim for?

As a rule of thumb, the payback period should ideally be under two years, and it
should never exceed three years. Naturally, the shorter the payback period, the better.
The target payback period depends on two key factors:

1 . Risk of the Operation: If your mining operation is in a riskier environment, you’ll

want to recoup your investment faster. A higher-risk operation should target a
shorter payback period to minimize exposure to potential losses.

2. Expected Lifespan of the Machines: If the machines you purchase are expected to
become obsolete or unprofitable in two years, it’s crucial to ensure they pay for
themselves well before that point. Less efficient or older models will require a
quicker payback period, whereas the most efficient models may allow for a bit more
time.

By considering these factors, you can set realistic targets for your return on
investment, helping you make more informed and confident decisions in your Bitcoin
mining venture.

37
 PART 8: HOW TO MINE BITCOIN
WITH HASHLABS
After reading this guide, you should now have a strong foundation for becoming a
successful Bitcoin miner. You've gained insights into the different mining models, learned
how to minimize costs, mitigate risks, maximize revenue, select the right machine, and
conduct a proper return on investment analysis.

As mentioned earlier, Hashlabs specializes in providing hosted Bitcoin mining solutions.

This means that while you own the mining machines, we handle all operations for you. You
receive all the mined Bitcoin from your machines, and you only pay for the electricity.

It's that simple! Throughout your mining

Here’s how the process works with
journey, we’re always here to assist,
Hashlabs: whether by phone or email.
1. Initial Contact: Reach out to us If you’re ready to start mining with
through our website. Hashlabs, don’t hesitate to contact us
through our website.
2. Consultation: We schedule a call or
communicate by email to discuss your We hope this guide has been helpful and
needs. wish you success in your bitcoin mining
endeavors!
3. Custom Setup: We help you design
the optimal Bitcoin mining setup
tailored to your goals.
BOOK A
4. Machine Sourcing and Deployment:
We source your machines, ship them CONSULTATION
to our data centers, and handle all the
technical aspects.

5. Hosting: We manage and host your

machines while you receive all mined
Bitcoin directly to your mining pool
account.

6. Monthly Payment: You only pay for

the electricity your machines
consume.

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