Cambridge Blockchain Network Sustainability Index: CBECI: Mining Data

Methodology

Overview

The Bitcoin Mining Production Cost metric provides a daily estimate of the marginal electricity cost required to earn one bitcoin (BTC). This indicator offers insight into the economic relationship between the network's energy consumption and the total revenue generated by miners.

The model derives the production cost per bitcoin by juxtaposing the network's estimated daily electricity expenditures against the total daily bitcoin rewards (block subsidies and transaction fees). Consistent with the CBECI framework, this metric assumes that miners act as rational economic agents and electricity costs are a primary determinant of operational expenditure.

Model Parameters

The production cost model considers the parameters outlined in Table 1.

Table 1: Model parameters

Parameter	Symbol of parameter	Description	Measure/Unit	Source
Annualised consumption	$E_{ann}$	The estimated annualised electricity consumption of the Bitcoin network	Terawatt-hours (TWh)	Dynamic: Frequency: Daily
Electricity rate	$P$	The global average cost of electricity incurred by miners	USD per kilowatt-hour (USD/kWh)	Static: estimate (default $0.05/kWh)
Total daily reward	$R_{total}$	The aggregate number of bitcoins earned by miners (block subsidies + transaction fees) on a given day	BTC	Dynamic: Frequency: Daily

Calculation

To determine the daily electricity cost to produce 1 BTC, we first derive the network's daily electricity expenditure (C_electricity). This is calculated by converting the annualised consumption estimate (E_ann) into a daily kilowatt-hour equivalent and multiplying it by the assumed electricity rate (P).

$C_{electricity,d} = \frac{E_{ann,d}}{365.25} \times 10^9 \times P \quad [1]$

$where,\\ E_{ann,d} = Best–guess\ annualised\ electricity\ consumption\ on\ day\ d,\ measured\ in\ [TWh]\\ P = Electricity\ rate\ per\ kilowatt–hour,\ measured\ in\ [USD/kWh]\\$

Next, we determine the total daily reward (R_total). This figure represents the sum of all block subsidies and transaction fees paid to miners on day d, denominated in BTC.

$R_{total,d}\ =\ \sum\ (Block\ Subsidies\ + Transaction\ Fees) \quad [2]$

Note: To mitigate the variance caused by short-term luck in block discovery and fee volatility, we apply a 7-day moving average to (R_total,d) before using it in the final calculation.

Finally, the production cost per bitcoin (Cost_btc) is derived by dividing the total daily electricity expenditure by the total daily bitcoin rewards.

$C_{btc,d}\ =\ \frac{C_{electricity,d}}{R_{total,d}} \quad [3]$

Key Assumptions and Limitations

Assumption 1: Model Dependency. This metric relies on the annualised electricity consumption estimate (E_ann) provided by the CBECI. Consequently, it inherits all underlying assumptions and limitations associated with that methodology, including hardware efficiency estimates and miner profitability thresholds. A detailed overview of the CBECI methodology can be found here.

Assumption 2: Uniform electricity rate. The model applies a default global average electricity cost (P) of 0.05 USD/kWh. Users may adjust this parameter to reflect different cost environments. It is acknowledged that actual electricity rates vary significantly by region and mining facility.

Assumption 3: Reward smoothing. The use of a 7-day moving average for both the electricity consumption estimate and the total reward ensures that the ratio reflects the underlying economic trend of the network rather than daily statistical noise (variance) in block discovery or fee spikes.

Limitation: Electricity cost-based estimate. This metric strictly estimates the electricity cost of production. It does not account for non-electricity expenditures such as hardware depreciation, facility rent, and labour. Therefore, the actual break-even cost for a miner will typically be higher.