Hashrate Index
Hashprice

Hashprice

What is Hashprice?

Hashprice – a term coined by Luxor in 2019 – quantifies how much a digital miner can expect to earn from a specific quantity of hashrate. Hashrate is the speed at which a computer (i.e., ASIC, GPU, CPU) is completing an operation in a cryptocurrency’s code. It is measured in hashes per second.

Common units of hashrate include:

  • TeraHash per second (1 TH/s = 1 trillion hashes per second)
  • PetaHash per second (1 PH/s = 1,000 TH/s)
  • ExaHash per second (1 EH/s = 1,000 PH/s)

Luxor’s Bitcoin Hashprice Index quantifies the expected value of 1 PH/s of hashrate per day on the Bitcoin Network. Hashprice is the true value a miner gets paid for the commodity they produce, hashrate.

Hashprice can be denominated in USD or BTC:

  • BTC hashprice is a function of three inputs: block subsidy, transaction fees, and network difficulty.
  • USD hashprice is a function of four inputs: block subsidy, transaction fees, network difficulty, and bitcoin price.

You can track live Hashprice here (opens in a new tab).

How is Hashprice calculated?

Hashprice can be denominated in USD or BTC:

  • BTC hashprice is a function of three inputs: block subsidy, transaction fees, and network difficulty.
  • USD hashprice is a function of four inputs: block subsidy, transaction fees, network difficulty, and bitcoin price.

Bitcoin’s hashprice changes with every new block added to the blockchain (i.e., block height). Luxor’s Bitcoin Hashprice Index uses a 144-block lagging simple moving average to account for transaction fees, and a simple average of the spot price for bitcoin on three US-based cryptocurrency exchanges to account for USD conversion. The BTC hashprice formula is used by a majority of mining pools to pay miners for their hashrate. USD-denominated hashprice is positively correlated with changes to Bitcoin’s spot price, block subsidy and transaction fees and negatively correlated with changes to Bitcoin’s network difficulty.

Factors that impact Hashprice

Block Subsidy

  • The block subsidy is the amount of newly minted bitcoin generated in each additional block on the Bitcoin blockchain.
  • The emission schedule sets out the block subsidy at each block and is determined by Bitcoin’s source code.
  • Bitcoin’s subsidy started at 50 BTC per block and is halved every 210,000 blocks (roughly 4 years), until block 6,930,000 (projected in 2140) when the block subsidy becomes zero and mining revenue will come exclusively from transaction fees.
  • The block subsidy is currently 6.25 BTC and the next “halving” is projected for May 2024.

Transaction Fees

  • Transaction fees are the amount paid by bitcoin owners when they transfer funds to another address.
  • They are collected by the miner or mining pool adding the block containing the corresponding transaction data to the Bitcoin blockchain.
  • Transaction fees allow users to prioritize their transaction getting included in the Bitcoin blockchain.
  • Bitcoin blocks can hold up to 1 MB of transaction data and miners have an economic incentive to include transactions with the highest associated fees.
  • Transaction fees can vary depending on transaction volumes, network congestion, Bitcoin upgrades, layer 2’s, and transaction batching.

Network Difficulty

  • Network difficulty is a quantitative measure of the probability of a miner or mining pool submitting a valid hash to the Bitcoin network’s cryptographic hash function (i.e., SHA-256).
  • Higher network difficulty indicates a lower probability of a miner submitting a valid hash.
  • Network difficulty is adjusted every 2,016 blocks (approximately every two weeks) to a level that targets an average block time of ten minutes.
  • If network hashrate grows (declines) and blocks are found earlier (later) than 10 minutes on average over the previous period, the network difficulty will increase (decrease).
  • Network hashrate / difficulty can vary depending on technological advancement, supply chain issues, geopolitical relations, and government regulation.

Bitcoin Price

  • Hashprice can be denominated in USD or BTC.
  • If the block subsidy, transaction fees and network difficulty are stable, the bitcoin price is the main determinant of USD-denominated hashprice.
  • The spot price of one bitcoin can vary depending on private sector adoption, speculative demand for risk assets, government regulation, monetary policy, cost of production, and supply issuance.
  • The price of bitcoin futures on exchanges like Binance and FTX can be evaluated for consensus views on future bitcoin prices.
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