Correct Cryptocurrency ASIC Pricing: Are Miners Overpaying?

Aviv Yaish*, Aviv Zohar*

*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceedingConference contributionpeer-review

1 Scopus citations


Cryptocurrencies that are based on Proof-of-Work (PoW) often rely on special purpose hardware to perform so-called mining operations that secure the system, with miners receiving freshly minted tokens as a reward for their work. A notable example of such a cryptocurrency is Bitcoin, which is primarily mined using application specific integrated circuit (ASIC) based machines. Due to the supposed profitability of cryptocurrency mining, such hardware has been in great demand in recent years, in-spite of high associated costs like electricity. In this work, we show that because mining rewards are given in the mined cryptocurrency, while expenses are usually paid in some fiat currency such as the United States Dollar (USD), cryptocurrency mining is in fact a bundle of financial options. When exercised, each option converts electricity to tokens. We provide a method of pricing mining hardware based on this insight, and prove that any other price creates arbitrage. Our method shows that contrary to the popular belief that mining hardware is worth less if the cryptocurrency is highly volatile, the opposite effect is true: volatility increases value. Thus, if a coin’s volatility decreases, some miners may leave, affecting security. We compare the prices produced by our method to prices obtained from popular tools currently used by miners and show that the latter only consider the expected returns from mining, while neglecting to account for the inherent risk in mining, which is due to the high exchange-rate volatility of cryptocurrencies. Finally, we show that the returns made from mining can be imitated by trading in bonds and coins, and create such imitating investment portfolios. Historically, realized revenues of these portfolios have outperformed mining, showing that indeed hardware is mispriced.

Original languageAmerican English
Title of host publication5th Conference on Advances in Financial Technologies, AFT 2023
EditorsJoseph Bonneau, S. Matthew Weinberg
PublisherSchloss Dagstuhl- Leibniz-Zentrum fur Informatik GmbH, Dagstuhl Publishing
Number of pages25
ISBN (Electronic)9783959773034
StatePublished - 1 Oct 2023
Event5th Conference on Advances in Financial Technologies, AFT 2023 - Princeton, United States
Duration: 23 Oct 202325 Oct 2023

Publication series

NameLeibniz International Proceedings in Informatics, LIPIcs
ISSN (Print)1868-8969


Conference5th Conference on Advances in Financial Technologies, AFT 2023
Country/TerritoryUnited States

Bibliographical note

Publisher Copyright:
© Aviv Yaish and Aviv Zohar;


  • Blockchain
  • Cryptocurrency
  • Economics
  • Proof of Work


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