Abstract
We propose a homogenous setting for analyzing the production industry of Bitcoin. Miners are assumed to be well diversified and to form a continuum due to free entry. We introduce the notion of real hashrate which is the actual hashrate deflated by the rate of technological progress assumed to be constant, and we show that this is the right measure to consider in such an analysis. In equilibrium, the revenue per unit of real hashrate follows a mean reverting process even with an unbounded reward process. Using the bitcoin blockchain data, we show that our parsimonious model explains well variations in the real hashrate. We provide a quantitative analysis of the R&D investment of mining hardware manufacturers. We show that, in the long run, R&D expenses, as well as the blockchain security and the bitcoin energy consumption, is proportional to the total miners reward (i.e. the bitcoin price).
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