Bitcoin mining: an operating business, not passive income
Mining is an industrial operation with electricity contracts, hardware depreciation, uptime risk, and thin margins. Understanding the cost structure matters far more than the headline price of Bitcoin.
Mining economics are driven by all-in electricity cost per kilowatt-hour, machine efficiency, uptime, pool fees, and network difficulty — all against a volatile revenue token.
Electricity is usually the dominant recurring cost.
Machine efficiency (joules per terahash) determines competitiveness.
Network difficulty rises as more capacity comes online, reducing revenue per machine.
Hardware and depreciation
Mining hardware is a depreciating industrial asset with limited resale value and long lead times. Buying at cycle peaks has repeatedly destroyed capital.
Assume aggressive depreciation in any model.
Warranty, repair capability, and spare parts affect real uptime.
Shipping, tariffs, and customs can materially change landed cost.
Hosting and self-operation
Hosting outsources power, cooling, and maintenance for a fee. Self-operation requires electrical infrastructure, cooling, noise management, permits, and monitoring.
Hosting contracts vary widely on curtailment, uptime guarantees, and termination rights.
Counterparty failure in hosting has caused total losses for customers.
Residential mining raises electrical, insurance, HOA, and zoning issues.
Accounting and taxes
Mined coins generally create income at receipt, with a separate capital event on later disposal. Equipment may be depreciable. Rules vary by jurisdiction.
Track receipt values daily; reconstruction later is painful.
Entity structure affects treatment of income and expenses.
Consult a CPA familiar with mining before beginning operations.
