Bitcoin mining is computational work performed by specially designed computers. Mining is an ongoing process where miners add new blocks to the Bitcoin blockchain roughly every 10 minutes.
This article is a beginner’s guide to Bitcoin mining. We will review the technical principles of mining along with the economic factors that influence miners. You will also get practical instructions on what to consider before starting mining.
Table of Contents
What is Bitcoin mining?
Bitcoin mining is the process of maintaining the Bitcoin blockchain. It is performed by mining devices on the Bitcoin network, which are specialized ASIC computers. Bitcoin requires mining to function because it uses the Proof of Work consensus algorithm.
Mining, in practical terms, is the continuous repetition of hash calculations. This might be a vague concept for a beginner, which is why mining is frequently explained using lottery numbers.
Imagine millions of computers competing against each other and trying to guess the correct lottery numbers. The more powerful a miner is, the more “guesses” (calculations) it can perform each second. The more guesses a miner can make, the more likely it is to guess the correct lottery number.
This calculation creates a proof of work. When you use enough resources to perform calculations and find a result that meets the requirements, you are allowed to add a new block to the blockchain.
Below is a picture of two ASIC miners manufactured by the Chinese company Bitmain, each with a computing power of almost 500 TH/s (500 trillion calculations per second).
It is often said that miners are trying to solve a complex mathematical equation. This is not entirely true. It is more of a performance that requires raw computing power and repetition. Therefore, the analogy of guessing lottery numbers works well.
Approximately every 10 minutes, one of the miners finds the correct hash value. Every 10 minutes or so, one of the miners finds the correct hash value. This miner gets:
- ⛓️ To add a new block to the blockchain and select the Bitcoin transactions to include in it.
- 💵 The block reward – currently 3.125 BTC per block.
- 💰 Transaction fees for all transactions included in the block.
New bitcoins are thus created as block rewards.
Once a block has been added to the blockchain, a new competition begins for the next block, i.e., finding a new hash value. Bitcoin miners sometimes find a hash value in a couple of minutes, but sometimes it can take tens of minutes. In the long run, the average is about 10 minutes.
Anyone can buy a Bitcoin miner and participate in mining. Most mining today takes place in large mining farms that can host tens of thousands of miners. These farms are often strategically located near cheap energy sources.
The mining of Bitcoin vs. other cryptos
Bitcoin is not the only cryptocurrency that is mined. In addition to Bitcoin, there are other Proof-of-Work-based cryptocurrencies that require physical mining equipment to operate. Dogecoin, Litecoin, and Monero are examples of such cryptos.
There are small differences in the technology of each mineable cryptocurrency. Their operating principle remains similar to Bitcoin’s: miners compete for block rewards and maintain the blockchain.
The biggest difference between Bitcoin and other PoW cryptos is the network’s hashrate, which means the total mining power (computational power) of all miners. Bitcoin’s hashrate is about 100 times higher than the combined hashrate of all other mineable (PoW) cryptos. This makes Bitcoin significantly safer compared to other PoW cryptos.
It is important to understand in which direction the technology is developing. Most mineable cryptocurrencies were created more than 10 years ago. In 2017, several cryptocurrencies also forked from Bitcoin, such as Bitcoin Cash. Proof of Work and mining are processes that emerged early in the crypto space.
Cryptos launched in the 2020s almost universally use the Proof of Stake (PoS) consensus. In a PoS network, ASIC mining devices have been replaced with standard network servers. This makes a PoS network much easier to launch and scale.
You can read a more extensive overview of mining different cryptocurrencies in this guide: Cryptocurrency mining explained.
The Bitcoin blockchain and mining
The Bitcoin blockchain is a public database that contains all transactions sent on the Bitcoin network. A blockchain is a type of distributed database. Most cryptocurrencies use a blockchain, but other distributed databases also exist.
A blockchain is essentially a series of data blocks linked together. You can think of a block as a file with a list of transactions. Each transaction contains information about the sender, the receiver, and the number of bitcoins sent, along with metadata.
Below is an image of a random Bitcoin transaction and the data it contains.
It is important to understand that the block size is limited. In the case of Bitcoin, a single block can hold approximately 4 megabytes of data. The limited size forces users to compete for transaction fees if they want their own transfer processed before others’. This increases transaction fees during busy periods.
Bitcoin miners build the Bitcoin blockchain. They create a new block from transactions sent to the network on average every 10 minutes. Bitcoin mining also secures the blockchain.
The Bitcoin blockchain is very secure due to the network’s hashrate. To manipulate data on the blockchain, an attacker would need more computing power than other network members combined. This is called a 51% attack. In practice, it is almost impossible for a single actor to accumulate enough capacity to attack Bitcoin.
You can read more about how the blockchain works in this article: What is a blockchain?
Mining fees and transaction fees
The economics of Bitcoin mining are at least as important as its technical implementation. Bitcoin mining must be economically sustainable; otherwise, it will cease to be performed by free-market participants.
The economics of Bitcoin mining often focus on mining fees. It is important to understand that miners’ income consists of two parts:
- Mining fees
- Transaction fees
The mining fee is currently 3.125 bitcoins per block. The share of transaction fees is much smaller than the block fee, but during peak times it has risen to tens of percent.
Bitcoin mining is a fierce economic race between mining farms as the network’s hashrate (mining power) increases over time. New miners are joining the network, and old mining equipment is being replaced with more efficient machines.
Below is a picture of the Bitcoin network’s hashrate growth. You can find up-to-date data on this page.
As Bitcoin’s hash rate increases, the block reward is halved every 4 years. This process is called the Bitcoin halving. The next block reward halving is estimated to occur in 2028.
This development means that an increasing number of miners are competing for the decreasing block rewards. This forces mining farms to continuously improve their operations by upgrading mining equipment and finding the cheapest electricity possible.
When will Bitcoin mining stop?
Bitcoin mining will continue, in theory, as long as the Bitcoin network is used and mining remains economically viable.
If Bitcoin mining were to stop, the entire Bitcoin network would stop functioning because no one would maintain the blockchain. In practice, Bitcoin’s security would have been compromised much earlier, to the point that Bitcoin would hardly be used at all.
Let’s address a common beginner question next. “Since Bitcoin’s block rewards will eventually drop to zero, won’t mining stop then?”
Bitcoin block rewards are halved every 210,000 blocks, roughly every 4 years. The final halving will occur at block 6,720,000 (estimated in 2136), when the reward will be halved to 0.00000001 bitcoin. This is equivalent to 1 satoshi, or 100 millionth of a bitcoin.
In 2140, the block reward will no longer be halved; it will instead drop to zero.
Will mining end in 2140? Probably not, because miners will still receive the transaction fees after this. However, transaction fees must increase to compensate for the elimination of the block reward (along with Bitcoin’s price) for mining to remain profitable.
Image below: inside a Bitcoin mining farm.
In practice, potential mining profitability issues are likely to arise well before 2140. This will also raise concerns about economic balance.
If transaction fees rise too much, small transfers will become too expensive. This, in turn, would reduce the use of the Bitcoin network, lowering transaction fees because they increase only as usage increases. At the same time, small transactions will increasingly move to the Bitcoin Lightning Network.
How will this dilemma be resolved? The topic will certainly be the subject of much discussion in the coming decades. Much also depends on whether Bitcoin’s price development continues to be as favorable as before, and whether new uses for the Bitcoin blockchain will emerge.
To summarize: The problem is not the end of mining rewards in 2140. If the reduction in block rewards causes problems for miners, they will arise well before 2140. Possibly in the next 10-20 years already. At the moment, the topic is only being considered at a theoretical level.
Bitcoin mining energy consumption
Bitcoin mining consumes a significant amount of energy. This energy consumption is often the biggest source of criticism against Bitcoin. Critics believe that such high energy consumption is unreasonable, as there are alternatives. There are millions of cryptocurrencies on the market, whose energy consumption is only a fraction of Bitcoin’s.
Bitcoin’s energy consumption makes it exceptionally secure. An attack on the network would require such a large amount of resources that it would not be economically sensible. Even if someone wanted to attack Bitcoin despite the financial losses, acquiring the required mining equipment would also be extremely difficult.
Bitcoin mining operates under free-market conditions. Numerous operators worldwide use their resources to run Bitcoin miners because they see it as economically viable. Profitability calculations are done daily, and mining farms are occasionally shut down if they fail to meet their profit goals.
However, the sensibility of Bitcoin mining is often assessed subjectively. One person may consider Bitcoin useless, while another considers it a valuable technology. In a free-market economy, resources are directed to where enough actors see value in them.
In recent years, Bitcoin mining has increasingly shifted to renewable energy sources. Mining companies use hydro, wind, solar, and nuclear energy. Bitcoin mining can also be located in areas where energy is generated in excess of local needs. This way, mining can use energy that would otherwise be partially unused.
Bitcoin’s energy consumption is a very broad topic that we will not cover in depth in this article. You can find a lot of information about it online from various sources.
Ultimately, it is a question of whether enough people consider Bitcoin so valuable that they are willing to sacrifice resources for it. If better alternatives enter the market, resources will then be directed elsewhere.
How to start Bitcoin mining in practice?
Next, we’ll go through what an average person should think about before getting started with Bitcoin mining
The facilities required for mining
A Bitcoin miner is a really loud computer that also produces a lot of heat. You can’t keep it running in the corner of your living room, for example.
You need a dedicated space for Bitcoin mining. For example, a garage, basement, storage room, or similar space that is not in continuous residential use.
The cooler the room, the better it is for the mining device. The waste heat produced by a Bitcoin miner can also be directed to other rooms for heating.
Mining equipment
Bitcoin mining is done with specially manufactured ASIC devices. Their prices vary from thousands of euros to tens of thousands of euros. The principle is the same as with other computers: the more expensive the device, the more capacity you get.
It is important to consider the continuous development of miners. The device you buy today may be profitable at a certain Bitcoin price, but the situation may be completely different a year from now, for example.
Mining rigs are constantly becoming more efficient, so older rigs become less competitive over time. It is important that the miner’s purchase price is covered by revenue as quickly as possible.
The profitability of a Bitcoin miner is a combination of its mining power (hashes per second) and electricity consumption.
Electricity consumption
Electricity consumption is a key part of the profitability of Bitcoin mining. Even if you buy the most powerful miner, the process won’t be profitable if your electricity contract is too expensive.
There are calculators online for all the mineable cryptocurrencies. You can enter your miner’s hashrate, its electricity consumption, and the price of your electricity contract into the calculator. The calculator will show you the estimated daily profit. For example, Minerstats.com offers a calculator to estimate Bitcoin mining profitability.
Remember to include all the costs you pay for electricity – not just the EUR/kWh price. For the average home user, mining is often profitable only when Bitcoin’s price is in a clear uptrend.
Mining pools
It is extremely unlikely for an individual Bitcoin miner to find a block on their own. The probability is roughly the same as winning the lottery several times in a row. This is why most miners join mining pools.
The idea of a mining pool is simple. Miners combine their computing power into a joint pool and share the rewards among participants. Mining pools can have tens of thousands of members. Well-known mining pools include Foundry USA, AntPool, and F2Pool.
A mining pool turns the random and infrequent block reward into a steady stream of income. Without a mining pool, an individual miner could have to wait tens or even hundreds of years to find a single block.
The pool usually charges a service fee of around 1–2%.
Wallet and taxes
You will also need a Bitcoin wallet to mine. It can be software installed on your computer, a mobile app, a browser add-on, or a physical device. You can learn more about the different types of wallets in this article: Bitcoin wallet beginner’s guide.
Bitcoin mining fees are paid in bitcoins (BTC), which are sent to your wallet at certain intervals. When you want to sell your mining rewards, you can send the bitcoins to an exchange and sell them for euros.
Remember that income from Bitcoin mining is taxable income. The Tax Administration’s instructions provide more detailed information on how equipment purchases and electricity costs can be deducted for tax purposes.
Risks involved in mining
Bitcoin mining involves financial risks you should be aware of. Here are the three most significant risks.
- Competition: Bitcoin mining becomes more difficult each year as competition increases. The profitability calculation you make today may quickly become outdated.
- Bitcoin price: Bitcoin’s price increase has previously compensated for the halving of block rewards. If Bitcoin’s price trend weakens, mining may become unprofitable for long periods.
- Other risks: Consider also technical problems with equipment or rising electricity prices.
Think carefully about whether the risks are acceptable to you. Generally speaking, it is much easier and safer for an average investor to buy Bitcoin directly than to begin mining.
Is Bitcoin mining profitable in 2026?
Generally speaking, Bitcoin mining will be profitable in 2026. However, the essential question is: for whom is mining profitable?
Competition for Bitcoin mining is intensifying every year. Mining is increasingly concentrated in large farms built near cheap energy sources. It is a billion-dollar business globally.
An ordinary person cannot compete with the largest players on profitability. However, this does not mean that Bitcoin mining couldn’t be profitable for a private individual, under certain circumstances.
“Is Bitcoin mining profitable right now?”
There is no clear answer to this. Profitability depends above all on your electricity contract and the price of Bitcoin. Profitability also depends on many other things, such as:
- Do you utilize the waste heat generated by mining?
- What kind of facilities do you have for mining?
- Are you doing the mining as a business or as an individual?
Remember that Bitcoin is not the only cryptocurrency that can be mined. Mining other cryptos could be significantly more profitable for the average individual.
The summary of Bitcoin mining
Bitcoin mining is a computational process performed using specially designed ASIC devices. A large number of mining devices operate worldwide, competing to create the next block on the Bitcoin blockchain. Bitcoin requires mining because it uses the Proof of Work consensus algorithm.
Miners receive a mining reward (3.125 BTC) and transaction fees of the block that they create. This means that new bitcoins are created during mining. All bitcoins will have been mined by the year 2140.
Bitcoin mining is also its biggest source of criticism. Mining is criticized for the electricity consumption it requires. Bitcoin’s share of global electricity consumption is small, but mining consumes as much electricity as many medium-sized countries.
Bitcoin mining increasingly relies on renewable energy sources. Most miners are located in large mining farms, which can be built near solar, hydroelectric, or nuclear power plants.
Anyone can buy a Bitcoin miner and start mining. However, it is difficult to mine profitably without access to cheap electricity. For the average investor, it is usually easier to buy Bitcoins directly.