2024 Global Blockchain Hardware Industry White Paper

Source: Frost & Sullivan

The payoff period for Bitcoin mining machines is determined by several critical factors, including the price of the machine, its hash rate, electricity costs, Bitcoin market prices, the total network hash rate, and the mining difficulty.

As the demand for Bitcoin increases, the total hash rate has seen exponential growth, leading to reduced daily revenue and a longer payoff period for miners. To calculate payoff period, two key formulas are used. The first formula calculates daily revenue based on factors such as the Bitcoin market price, the hash rate of the machine, and electricity costs. The second formula determines the payoff period, indicating how long it will take for the mining machine to generate enough revenue to cover its initial cost.

Bitcoin market price is affected by demand and supply and total hash rate is exponentially rising these days, thus reducing daily revenue and lengthen the pay off period of Bitcoin mining machine. The utility cost with mining activities in states like Texas, Wyoming, Washington, and Kentucky ranges from USD0.1 per KWH to USD0.12 per KWH. Some certain areas have even lower power costs.

Blockchain hardware refers to electronic devices designed to support and facilitate the operation of blockchain technologies, enabling the execution of various blockchain-related functions. Typically, blockchain hardware has been predominantly used for cryptocurrency mining, where owners are rewarded with specific cryptocurrencies for contributing computing power, storage, bandwidth, or other resources to the network. High-performance devices, such as ASIC miners, continue to dominate this area.

In addition, the market is evolving, and blockchain hardware is increasingly being utilized in other emerging applications. These include decentralized storage and calculation solutions, such as Golem, that harness idle computing power. Additionally, blockchain hardware is gaining traction in the Internet of Things (IoT) and edge computing sectors, where it ensures secure and transparent data exchange between devices through blockchain technology.

Source: Frost & Sullivan

The Bitcoin industry is composed of five major segments: hardware supply, mining farm and mining pool operation, trading, and payment processing. Hardware suppliers, such as Canaan, which was the first Bitcoin mining hardware company to go public and ranked second in terms of computing power sold among all Bitcoin hardware providers for the year ending December 31, 2023, are primarily involved in the IC design, manufacturing, and sales of mining machines. This segment plays a crucial role in the industry's infrastructure, providing the specialized equipment necessary for efficient cryptocurrency mining.

Mining venues typically refer to physical sites where operators offer custodial services for customers' mining hardware. These venues have become increasingly important as the scale of mining operations grows, requiring significant infrastructure and energy resources. The operation of mining pools, on the other hand, involves coordinating the collective computing power of miners, enabling them to share resources and split mining rewards more evenly. This approach helps individual miners reduce the volatility of their earnings and increases their chances of successfully mining blocks.

Trading services are provided by cryptocurrency exchanges, which facilitate the buying and selling of cryptocurrencies for consumers. These exchanges are critical to the liquidity and price discovery of Bitcoin and other digital assets, influencing market dynamics on a global scale.

Payment services are provided by Bitcoin payment processors, enabling merchants and businesses to accept Bitcoin payments from customers for goods and services. This segment is essential for integrating Bitcoin into the broader economy, allowing for its use as a medium of exchange and driving adoption among a wider audience.

Source: Frost & Sullivan

The rapid expansion of Decentralized Finance (DeFi) is driving significant changes in the global blockchain hardware market. As platforms like Uniswap grow in popularity, the demand for more advanced and scalable blockchain infrastructure becomes crucial. The shift towards decentralized exchanges (DEXs) reflects a broader movement in the financial industry, emphasizing the need for transparency, security, and user autonomy in financial transactions.

This trend is evident in the substantial increase in Uniswap's trading volume, which surged from USD59 billion in 2020 to over USD1 trillion by 2023. Additionally, the ratio of DEX to centralized exchange (CEX) spot trade volumes has steadily increased, reaching nearly 14% by 2024. These metrics highlight the growing market share of decentralized platforms and their influence on the overall blockchain ecosystem.

In conclusion, the growth of DeFi, as illustrated by Uniswap's performance and the increasing dominance of DEXs, signals a fundamental shift in the blockchain landscape. This evolution underscores the critical need for ongoing innovation in blockchain hardware to support the expanding DeFi ecosystem, ensuring that it can meet the demands of a rapidly changing financial environment.

The increasing adoption of cryptocurrencies and CBDCs is a pivotal trend shaping the blockchain hardware industry. From just 636 cryptocurrencies in 2017 to over 13,000 by July 2024, the rapid expansion demonstrates not only market acceptance but also the growing integration of digital currencies into the global financial system. This surge reflects a broadening recognition of cryptocurrencies as legitimate financial instruments, necessitating the development of advanced blockchain hardware to support their widespread use.

Governments are also playing a crucial role in this trend by endorsing and developing Central Bank Digital Currencies (CBDCs). Countries like Nigeria and the Bahamas have already launched their CBDCs, while major economies such as the European Union and China are actively exploring similar initiatives. These government-backed digital currencies further validate the role of digital assets, paving the way for broader public adoption.

As both market forces and government support converge, the demand for secure, scalable blockchain infrastructure will only increase. This trend not only highlights the importance of cryptocurrencies in the modern economy but also underscores the critical need for robust hardware solutions to sustain and propel the growth of this rapidly evolving market.

The rise of NFTs (Non-Fungible Tokens) and digital assets continues to be a major trend shaping the blockchain hardware industry. As of 2023, the global NFT market size was valued at approximately USD48.74 billion, up from just $94 million in 2020. This explosive growth is driven by the increasing use of NFTs in various sectors, including digital art, gaming, and collectibles. Notably, digital assets accounted for the highest revenue share in the NFT market, with brands like Nike, Disney, and Gucci leveraging NFTs to engage with customers and create new revenue streams. These brands' ventures into NFTs underscore the commercial viability of digital assets and highlight a growing trend where major companies are not only adopting but also innovating within the NFT space.

This trend indicates that the blockchain hardware industry must continue to innovate to support the expanding needs of the NFT market. As more sectors embrace NFTs, the demand for advanced, scalable, and secure blockchain hardware solutions will only grow, making this a critical area for future development in the industry.

The global blockchain hardware industry is being shaped by significant Technological Advancements and Green Technologies. As seen in the charts, Bitcoin mining hardware has made impressive strides in reducing energy consumption, with energy efficiency improving from 516.6 J/TH in 2016 to just 29.6 J/TH in 2024. This reduction highlights the ongoing innovation in hardware design aimed at supporting more powerful, yet less energy-intensive, operations. Similarly, Ethereum's transition to Proof of Stake has drastically cut its energy use, from 94.0 TWh to 3.4 TWh annually, underscoring the industry's shift towards more sustainable blockchain solutions.

In addition to energy reductions, the adoption of advanced cooling technologies, like liquid cooling systems, reflects the industry's move towards greener operations. Companies like Canaan and MicroBT are introducing hardware that enhances performance while minimizing environmental impact. The growing use of renewable energy in mining, now accounting for up to 78% of energy sources, further emphasizes the industry's commitment to sustainability. These developments indicate that the future growth of blockchain hardware will be driven by ongoing technological innovation and a strong focus on green technologies.

The above mentioned content is just the illustration of the White Paper. For the full report, please scan the QR code and access to it.