R22Second Order
Who keeps the gain when electricity gets cheaper?
Give one miner cheaper electricity and the margin improves. Give the industry cheaper electricity and the network answers. More machines can switch on, competition for the same block reward rises, and difficulty adjusts. The cheap electron does not disappear. Its benefit moves through the system.
The short answer
The first adopters can keep a temporary margin advantage. If cheaper firm power is widely available, hashrate entry and difficulty can socialize part of the gain into greater network competition. Hardware owners, power producers, grid operators and the protocol each capture different pieces depending on capacity, timing and curtailment.
Original GapLimit object
The difficulty feedback loop
Use the scenario control to see how an assumed entry response can return pressure to unit economics. Inputs are assumptions, not forecasts.- Electricity cost index
- 85100 = baseline
- Opportunity per hash index
- 83.3holding network revenue fixed
The model keeps the effects separate. It does not combine them into a profit forecast because electricity is not the only cost, and future Bitcoin price, contracts and adjustment timing are unknown.
The private gain
For a fixed machine and Bitcoin price, lower electricity cost improves the operator's contribution margin. The size depends on machine efficiency, uptime, pool fees, cooling and the power contract. A headline power price alone cannot establish profitability.
The network response
Bitcoin periodically adjusts proof-of-work difficulty toward its target block interval. When profitable capacity joins, one miner's share of total work can fall even while the network becomes harder to attack. The individual and network outcomes point in different directions.
The bottleneck moves
If electricity loses scarcity, efficient hardware, transformers, land, permits, cooling or interconnection can become the constraint. Capital bids for the next scarce input. The industry's cost curve changes shape rather than vanishing.
Flexible load has a second revenue
EIA documents miners participating in demand response and reducing use during high-price periods. In some markets the ability to stop has value. That can make a mine's economics depend on grid services as well as hashing, while also making public estimates based on nameplate capacity misleading.
Thesis audit
Pressure the bridge
- Causal bridge
- Lower power price → higher private margin → entry or restart → higher network hashrate → difficulty response → margin compression.
- Counterforce
- Hardware shortages, financing limits, transmission queues or falling Bitcoin revenue can prevent hashrate from responding.
- What would prove it wrong?
- The feedback thesis weakens when cheaper power remains geographically isolated or contractually unavailable to additional miners long enough for incumbents to retain the gain.
- Largest uncertainty
- The model is directional, not a profitability forecast. It does not use private contracts, future Bitcoin prices or an assumed hashrate response as facts.
Source ledger
Evidence carrying this piece
Sources accessed 2026-09-06. Links point to the originating institution where available.Follow the thread