December 8, 2022

The Bitcoin mining industry has now grown to the point where it is benchmarked against other similar industries that have been around for much longer. However, the operations of these commodity-based bitcoin mining companies are very different. It is most evident in the way these companies approach their revenue in relation to administrative costs, which differ greatly between mining companies and other commodity-based companies.

Bitcoin miners spend a lot

It has been proven that public bitcoin miners spend a much larger portion of their revenue on management costs. Given the spending patterns of other commodity-based companies, bitcoin miners spend a very large proportion on management.

The average proportion of revenue spent by bitcoin miners on administrative costs is around 50%, although this is an industry average. Some managed to reduce their administrative spending while others were found to spend almost all of their revenue on this.


BTC mining firms spend more of their revenue | Source: Arcane Research

A comparison of bitcoin miners, gold mining, and the oil and gas industry shows a huge contrast here. In the oil and gas industry, the average expenditure on administrative costs was 2%, while the administrative costs of the gold mining industry amounted to 3%.

Why do they spend so much?

Bitcoin miners spend a lot on management partly because of their young age. Unlike their counterparts in the gold mining and oil and gas industries, they did not have time to reach an equilibrium where their administrative costs cost only a small portion of the revenue.

Digital Marathon is a mining company that uses nearly 100% of its revenue. Last year, the company reported revenue of $266 million, and spent $259 million on management. The company offers a generous stock compensation program for its senior employees, and given that these executives were able to meet all of its growth targets for the year, the company had to spend $161 million in revenue on stock compensation for its executives alone.

Bitcoin price chart from

BTC trending above $19,000 | Source: BTCUSD on

On the other end of the spectrum, some miners have been able to reduce their administrative spending. Argo Blockchain has managed to reduce its administrative costs since 2021 to 16% of its total revenue, one of the lowest in the space.

Another reason is that companies are too small, and stakeholders have very little oversight over the companies. And because it is a capital-intensive industry, they are able to pay out such huge compensation for executive shares. However, as the industry becomes more mature, more shareholder oversight is expected, narrowing down the amount of revenue spent on administrative costs.

Featured image from TechSpot, charts from Arcane Research and

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