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What is bitcoin mining?

Crypto miner in a bitcoin mine monitoring bitcoin mining software.
Bitcoin mining requires expensive, specialized computers with robust energy capabilities. PixeloneStocker/Getty Images
  • Bitcoin mining involves confirming transactions and adding them to the blockchain. 
  • As a reward for this work, miners receive newly issued bitcoins. 
  • The cost of the hardware and energy involved can make profiting from Bitcoin mining difficult. 

Bitcoin mining is a crucial part of cryptocurrency's underlying technology. Rather than buying bitcoin from an online exchange, miners compete to solve highly complex mathematical equations. The first to figure it out receives the reward of newly created bitcoins. 

Anyone with advanced technology and coding skills can mine for cryptocurrencies. Those interested, whether independently or with a group, should ensure they have the proper knowledge and equipment for cryptocurrency mining. Those with limited computer skills are better off buying bitcoin directly through one of the best cryptocurrency exchanges

Here is how cryptocurrency mining contributes to the bitcoin ecosystem and associated risks. 

How bitcoin mining works

Bitcoin is a cryptocurrency, meaning that it is a currency that leverages cryptography. It can be used to make payments without financial institutions or the government involved. The digital currency, which has attracted significant interest from investors, trades on numerous exchanges. 

The race to solve these increasingly difficult cryptographic puzzles requires significant amounts of energy. But this cost is intentional, since the bitcoins created can be very lucrative.

Here's how it works:

  • Transactions and blocks: Miners are paid in bitcoin every time they add a block to the blockchain. The price of bitcoin is highly volatile, so the value of this mining incentive can vary significantly. Only the first miner (or pool of miners) to solve the mathematical problem is rewarded with the new bitcoin.
  • Proof of work: A consensus tool used to verify new transactions on the Bitcoin blockchain. Bitcoin miners are incentivized to ensure authenticity on the platform to secure the network. However, it requires a substantial amount of energy. 
  • Blockchain update: The miner, or joint mining pool, solves the equation before everyone else shares the result with the other systems in the broader network. The block is added to the blockchain if the others verify the solution is valid. 

The winning miner receives a mining reward, which is currently 3.125 BTC. This incentive, which was originally 50 bitcoins, is reduced by 50% every four years during events referred to as halvings. Bitcoin underwent halving events in 2012, 2016, 2020, and 2024. 

Why is bitcoin mining important?

Mining is the process of verifying transactions and adding them to the blockchain. This process not only introduces new digital coins into circulation but also strengthens the network's security.

  • Network security: Bitcoin and other altcoins rely on mining to confirm transactions and add them to the blockchain. Mining secures the decentralized nature of the network, further securing transactions and preventing double spending and other fraudulent transactions.
  • Transaction verification: The bitcoin decentralized network was designed to allow interested parties to transact without going through intermediaries like banks. Bitcoin mining confirms and validates these transactions to ensure legitimacy on the blockchain. 
  • Bitcoin creation: As of 2025, over 21 million bitcoins are available, with nearly 1.08 million left to mine. Without mining, the remaining unmined coins wouldn't be able to go into circulation. 

Is bitcoin mining worth it?

Bitcoin mining, which involves confirming transactions, can potentially be profitable. However, the extent to which this activity is profitable depends on several variables, including hardware costs, energy expenses, and bitcoin prices. 

It's not feasible for many individuals to get involved with bitcoin mining, as doing so could involve investing thousands or tens of thousands of dollars without a guaranteed return.

"The profitability of bitcoin mining depends on a multitude of factors, such as the cost of electricity, the mining equipment you're using, and the number of other people who are also mining bitcoin," says Nick Spanos, cofounder of Zap Protocol.

Instead, investors interested in getting involved in bitcoin might want to purchase bitcoins from the exchange or invest in shares of crypto-mining stocks, which grant exposure to publicly traded mining companies, or bitcoin ETFs, which offer indirect market exposure with slightly less risk. 

Bitcoin mining hardware and software

You can't mine bitcoin with a normal computer. Instead, you must have specialized hardware with robust hashing power. Initially, cryptocurrency miners could use regular CPUs to mine bitcoin at home. However, more advanced hardware systems eventually dominated the industry. 

Specialized hardware

  • ASIC: Application-specific integrated circuits (ASICs) are integrated circuit chips costing upwards of $10,000. These specialized computers mine cryptocurrencies by solving complex cryptographic puzzles using specific hashing algorithms.
  • GPU: Graphic processing units (GPUs) are specialized computer systems that efficiently mine bitcoin and other cryptocurrencies. GPUs originally replaced CPU-based mining as faster and more powerful hardware.

Mining software

Bitcoin mining software requires specialized hardware. When choosing the best bitcoin mining software for your needs, it is crucial to ensure that your equipment is compatible with your mining rig and blockchain. Other considerations include price, interface accessibility, performance power, and security. 

The open-source nature of many mining software programs provides users with access to developer support. However, this also underscores the importance of implementing robust security measures. To mitigate the risk of malware, it's essential to download mining software only from verified sources.

Popular bitcoin mining software includes CGMiner, EasyMiner, Multiminer, and BFGMiner. 

Mining pools

Bitcoin mining pools are groups of crypto miners who "pool" all their resources together to solve mathematical puzzles and earn bitcoin more consistently than solo mining. Nearly all mining pools require participants to pay a fee to join. Be cautious of mining pools that advertise themselves as free, as they are usually scams. 

You must have mining hardware, software, and a bitcoin wallet to join a mining pool. Some top mining pools include Foundry USA, Antpool, and F2Pool. Foundry USA has mined around 30% of all bitcoin blocks.

Challenges of bitcoin mining

There are several risks involved in mining bitcoin. The total expenses, including the cost of hardware and energy, can be significant. And there is no guarantee that an individual running a system on the network will see a return on their investment. 

High energy consumption

Since proof-of-work involves hardware that requires a lot of electricity, energy costs are a major factor in profitability. Bitcoin mining has also created some controversy due to concerns about how it affects the environment. Some industry observers have estimated that this activity has a carbon footprint similar to that of a small country. 

The harmful effects of bitcoin mining have sparked a global debate. Some countries are attempting to limit the dangerous impact that bitcoin mining computers have on the environment. Certain countries have even banned bitcoin mining altogether. 

For example, Swedish government officials wrote an open letter in 2022 requesting that the European Union ban bitcoin mining. They stressed that this activity is reducing Sweden's chances of meeting the goals it agreed to under the Paris Climate Agreement. Bitcoin mining is still legal as of 2024. 

Increasing difficulty

Another key consideration is that generating a block could take months or even years, depending on the level of computing power committed to it. To hedge risks like this, individual computers can participate in mining pools. 

Also worth noting is that the mining incentive, or reward for mining a block, is reduced by 50% every four years. It's currently at 3.125 bitcoins and is expected to be halved again in 2024.

Cost of hardware and electricity

Specialized computers like ASIC cost around $10,000, not including the additional energy expenses. Mining a single bitcoin can cost thousands or tens of thousands of dollars, depending on the hardware used.

"For most people living in the US and Western Europe, where per-unit electricity costs are high, it is difficult to turn a profit mining bitcoin, but not impossible," says Spanos. "People living in Asia have access to much cheaper electricity, but they are less likely to be able to afford the upfront cost of getting into bitcoin mining."

Possibility of becoming illegal

Bitcoin mining is legal in most countries, but several jurisdictions have already banned it. China, one of the world's largest economies, outlawed bitcoin mining in 2021, and the nation's government has also prohibited all cryptocurrency transactions. 

Analysts have explained this aggressive action by saying that China's authorities believe cryptocurrencies could interfere with the nation's plans to roll out a central bank digital currency, which it has been testing. 

Other countries, such as Nepal and Algeria, have banned bitcoin mining by prohibiting all cryptocurrency-related activity. Nepal outlawed mining in 2019 when it passed the Foreign Exchange Act. Algeria did the same thing the year before. 

How to get started with bitcoin mining

Only those with advanced technical knowledge and access to expensive, specialized software should attempt to mine bitcoin or other cryptocurrencies. 

Choose a mining method

First things first, how do you plan on mining? Your bitcoin mining method can help guide you toward the best equipment and how much money you need to invest.

Miners generally have the most success joining a mining pool. But no one can stop you if you're determined to mine solo. Solo miners are at a notable disadvantage compared to mining pools simply because they lack access to multiple mining rigs simultaneously. 

Cloud mining is another bitcoin mining method to consider. It utilizes automated mining hardware to do the mining process for you in exchange for an upfront payment. If this sounds almost too good to be true, it's because it is. Most cloud mining services are scams and have been compared to Ponzi schemes. 

Acquire hardware and software

Once you know how you want to approach mining for bitcoin, you can shop around for the best mining hardware and software. Remember that bitcoin mining equipment is very expensive, and cutting corners by buying cheaper equipment will hurt your rig's ability to mine efficiently. 

When purchasing mining hardware and software, consider efficiency, hash rate, power consumption, and price. 

Set up your mining rig

A mining "rig" is a customized personal computer (PC) that uses GPUs over CPUs. Mining rigs often include multiple GPUs for a higher hash rate. You can also choose to get an ASIC instead of a GPU. 

Other than an ASIC and GPUs, components required to build a bitcoin mining rig include the following: 

  • A motherboard
  • Random access memory (RAM)
  • Hard drive or SSD 
  • Operating systems like Rave OS or Awesome Miner
  • Power supply unit (PSU)
  • Internet connection

Setting up your bitcoin mining rig may require a lot of adjusting and tweaking of components to get the result you're looking for. 

FAQs about bitcoin mining

Is bitcoin mining profitable?

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Bitcoin mining can be profitable, but earning a profit isn't guaranteed. Moreover, there's a significant amount of expensive equipment, energy costs, and other fees involved that would eat away at any potential gains. Most bitcoin enthusiasts are better off buying bitcoin through an online exchange. 

How long does it take to mine one bitcoin?

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How long it takes to mine one bitcoin varies significantly based on mining power and network difficulty. On average, it takes a solo miner around 10 minutes to mine one bitcoin block. 

Is bitcoin mining legal?

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Bitcoin mining is legal in the US. However, an increasing number of countries have banned bitcoin mining. Countries where bitcoin mining is illegal include China, Algeria, Iran, Columbia, Ghana, and Morocco. 

Check out Business Insider's picks for best cryptocurrency exchanges

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