Curriculum·J313 Mining, Validating, and Running Infrastructure·about 42 min
Proof of Work economics
By the end of this lesson you can
- →Explain how difficulty adjustment converts a competitor's exit into your revenue
- →Compute a machine's daily margin and its break-even electricity price
- →Show why the electricity price is the business and everything else is detail
- →Identify the four risks a mining operation carries that a holder does not
Junior · enrolled learners
This lesson opens with The China mining ban, May to July 2021.
- What happened
- On 21 May 2021 China's State Council signaled a crackdown on bitcoin mining, followed by provincial orders through June. China had accounted for roughly 60 to 65 percent of global hashrate. Network hashrate fell from about 180 exahashes per second on 14 May to about 86 by 4 July, a reduction near 52 percent and the largest forced decline in the network's history. Machines were physically shipped to the United States, Kazakhstan and elsewhere, a process taking months and costing capital while the hardware earned nothing. The network itself continued producing blocks throughout, adjusting difficulty downward so that the remaining miners earned proportionally more. Hashrate recovered fully within about six months and reached a new high within about eight.
- The decision point
- The protocol was indifferent. Difficulty fell, the surviving miners earned roughly twice as much per unit of hash, and blocks kept arriving on schedule. What failed was a set of businesses whose assets were physical, whose location was a license somebody else granted, and whose revenue was set by a global difficulty they could not influence. Mining is a business with jurisdiction risk, and the protocol prices that risk at zero.
What you will be able to answer
- →What does difficulty adjustment do?
- →What happened to a surviving miner in 2021?
- →What is the break-even electricity price?
- →What four risks does a miner carry that a holder does not?
Orientation and Year One are open: anyone can read them without an account. From Year Two onward the lessons are for enrolled learners, because progress through the later years only means anything if it is tracked against a record.
It is free. We do not sell the list and there is nothing to buy at the end of it.
Sources and review
- https://blog.hashrateindex.com/bitcoin-mining-ban-china-hashrate-migration
- https://www.coindesk.com/business/2022/12/21/core-scientific-one-of-the-largest-bitcoin-miners-files-for-bankruptcy-protection
- https://www.cnbc.com/2022/12/20/bitcoin-miner-core-scientific-filing-for-bankruptcy-will-keep-mining.html
- https://www.theblock.co/post/360320/bitcoin-mining-difficulty-sees-biggest-drop-since-2021-china-ban-hashrate-slump
Confidence high·Volatility high·Reviewed 2026-08-06·Owner unassigned
Contested
The machine parameters in part two, being 100 terahashes per second at 3,250 watts, a 600 exahash network, a 3.125 bitcoin subsidy and a $60,000 price, are stated inputs chosen so the arithmetic can be re-run rather than current figures. Hashrate, price, subsidy and hardware efficiency all move continuously and the subsidy halves on a schedule. The method is the durable part and the numbers are not.
Estimates of China's pre-ban share of hashrate vary between about 46 percent and 75 percent depending on the source and the month, with 60 to 65 percent a common figure. The hashrate decline itself is measurable on-chain and is not in dispute.
F101-02 owns hashpower as a security property, being what a confirmation costs to undo. This lesson owns mining as a business. Keep the split.