Block reward miners are shifting from Bitcoin to Zcash, after the surge in ZEC price pushed the privacy coin into the top ten by market cap, the revenue per unit of energy consumption of top mining equipment has reached about four times that of Bitcoin's strongest mining machines.
For miners whose revenues have continued to shrink over the past few years, especially since the last halving event, the potential returns from Zcash mining have made decisions about power deployment straightforward.
Why did the Z15 Pro suddenly outperform Bitcoin's strongest ASIC?
The economics have tilted toward the privacy coin. According to The Energy Mag data, as of August, the Bitmain Z15 Pro mining Zcash can produce about $727.30 per megawatt-hour (MWh) of electricity generation, compared with $585.61 on June 30.
During the same period, the most advanced Bitmain S23 Pro mining Bitcoin returned only $179 per MWh, and the older S21 Pro was even lower at $113.45. Only AI cloud computing loads, with returns close to $941/MWh, exceeded Zcash mining machines.
As of early September, Z15 Pro revenue was about $708/MWh, down about 3% from its August peak, as more equipment connected to the network. Revenue is tied to the ZEC price, which hit an all-time high of $890 in August.
The ETF funds that ignited the rally
The mining machine economic model is built on the token rally fueled by Grayscale. On August 25, the company converted the Zcash Trust into an exchange-traded fund and listed it on NYSE Arca under the ticker ZCSH, becoming the first U.S. product to provide spot exposure to a privacy coin.
According to Grayscale disclosures, the fund's assets under management exceeded $500 million within two weeks, including about $100 million injected by its parent company Digital Currency Group's DCG International Investments, corresponding to 85,705.32563297 ZEC in exchange for shares.
ZEC rose along with the capital inflows. It broke through $1,000 for the first time on September 4, and CoinMarketCap now reports about $1,180, with a market cap of about $20 billion. On September 3, Grayscale attributed the rally to "the hard money narrative and awakening digital privacy awareness."
The land grab for Zcash hash rate
High profits attract competitors, diluting marginal returns. Cypherpunk Technologies (Nasdaq: CYPH), backed by Cameron and Tyler Winklevoss, invested $33.33 million in August to build what it calls the world's largest Zcash mining fleet, with a hash rate of about 4.2 GSol/s, accounting for about 18% of the entire network. The company holds nearly 2% of ZEC's circulating supply and aims to increase that to 5%.
It is not the only competitor. Foundry USA launched an "institutional-grade" Zcash mining pool in March and captured nearly 30% of the hash rate share within a month. DCG subsidiary Fortitude Mining Holdings acquired a 12.5 MW mining site in Nebraska to expand capacity.
As the network-wide solrate grows faster than the coin price, the monthly block reward of about 43,800 ZEC shared by each participant continues to shrink.
Bitcoin miners were already leaving
The shift to Zcash comes as Bitcoin mining loses its luster. BTC's rebound faltered after hitting $82,000 on September 3, and it now trades at about $77,000, with network difficulty reportedly set to rise again on September 19.
Canaan's Q2 mining revenue was $17.7 million, with a net loss of $97.6 million, and its Q3 revenue guidance is as low as $11 million.
Many miners have abandoned crypto entirely and turned to artificial intelligence. According to an August 25 report, Riot Platforms signed a $9 billion, 20-year computing power agreement with Anthropic, and Bitdeer reached a 16-year major deal.
