What is Bitcoin mining?
Bitcoin mining is the process that ensures the security and functionality of the BTC network.
Bitcoin (BTC) miners gather pending transactions, group them into blocks, and conduct repeated hashing attempts (trial and error) until they find a hash that satisfies the network’s difficulty target.
The first miner to discover a valid solution broadcasts their block, and once verified by the network, they receive a reward.
If another miner successfully solves the block beforehand, your result is invalid, referred to as a “stale block,” requiring you to restart with a new set of transactions for the next block.
As of 2025, the block reward stands at 3.125 BTC, following the halving in April 2024. Miners also earn transaction fees, which vary depending on network congestion.
The competition is intense, with high barriers to entry. Nowadays, nearly all miners utilize specialized Application-Specific Integrated Circuit (ASIC) machines, and many join mining pools to stabilize their earnings by sharing rewards with others.
Did you know? Many mistakenly believe that Bitcoin miners “solve complex cryptographic puzzles.” The truth is, there’s no puzzle to crack. Miners simply make trillions of guesses every second until one yields a hash below the network’s difficulty target.
How a block is actually found
Here’s a step-by-step guide on how a block is mined on the Bitcoin network:
A miner creates a candidate block from pending transactions in the mempool.
They include a special “coinbase transaction” (not related to the Coinbase exchange), which both mints new BTC and claims transaction fees.
The miner continuously hashes the block’s header (using SHA-256) while modifying the nonce (a number used only once).
The objective is to identify a hash value lower than the current network difficulty target.
Once a valid block is discovered, the miner broadcasts it to the network. Other nodes independently validate its proof-of-work and transactions before adding it to their local version of the blockchain.
If two miners discover valid blocks simultaneously, the blockchain can momentarily split into two versions. The network resolves this by allowing the branch with more proof-of-work (PoW) to become the main chain, while the other is discarded as a “stale” block.
This mechanism guarantees that Bitcoin’s consensus adheres to the chain with the highest accumulated work, keeping forks brief and the ledger robust.
Mining rewards after the 2024 halving
In April 2024, during Bitcoin’s fourth halving, the block reward decreased from 6.25 BTC to 3.125 BTC.
This is the fixed reward every miner battles for. With approximately 144 blocks mined daily, the network issues around 450 new BTC every day, excluding transaction fees.
The fee wildcard
Transaction fees add unpredictability to miner earnings.
Around the April 2024 halving, Bitcoin experienced a spike in activity, driven by the launch of Runes, a new token protocol that inundated the mempool with transactions. For a brief time, transaction fees actually surpassed the 3.125 BTC block reward. Certain blocks provided miners with tens of BTC purely in fees, an unusual windfall compared to typical averages.
However, these spikes were fleeting. By mid-2025, median fees reverted to standard levels as demand diminished.
This pattern is well-known: whenever the mempool becomes overloaded, whether from new protocols, buzz cycles, or significant on-chain events, users compete for space in Bitcoin’s restricted 1 MB-4 MB block window. Once the backlog is cleared, bidding wars cease, and fee revenue normalizes.
Hashrate and difficulty
Mining power is quantified in hashrate, representing the total computing power committed to securing the Bitcoin network.
Bitcoin maintains block times near 10 minutes by adjusting mining difficulty every 2,016 blocks, or roughly every two weeks.
Here’s how the cycle functions:
When hashrate increases, blocks are mined faster than intended, prompting the next adjustment to raise difficulty.
If hashrate declines, blocks take longer to create, and the network lowers difficulty to compensate.
For miners, a higher difficulty translates to fewer BTC earned for the same effort. Each difficulty retarget feels like an “earnings report”; it recalibrates revenue expectations for the following two weeks.
In 2025, both the hashrate and difficulty are hitting all-time highs. Newer, more efficient ASIC fleets continue launching, raising difficulty and pushing older rigs out of business.
Operators with elevated power costs are usually the first to shut down unless they can remain operational by securing cheaper energy or capitalizing on sudden price and fee spikes.
Bitcoin mining remains an unending race: only the most efficient configurations endure when profit margins narrow.
Did you know? Bitcoin’s 10-minute block interval was devised as a compromise: short enough for reasonably swift confirmations yet prolonged enough to reduce the likelihood of concurrent block discoveries and chain splits.
Hardware and setups in 2025
Bitcoin mining focuses on maximizing efficiency from each watt of power. By 2025, the industry evolved well beyond hobbyist setups.
The hardware miners use
At the heart of nearly every modern mining facility are ASICs, machines designed exclusively for Bitcoin. Their efficiency is expressed in joules per terahash (J/TH), indicating how much energy is consumed to produce one unit of hashing power.
Air-cooled units: These remain the industry’s workhorses — models such as Bitmain’s S21 (17.5 J/TH) and MicroBT’s M60S (18.5 J/TH) dominate large-scale farms. High-end variants like the Bitmain S21 XP push efficiency to around 13.5 J/TH.
Hydro and immersion rigs: These lead the industry, with models like the S21 XP Hyd rated near 12 J/TH. They offer top-tier performance but require specialized liquid-cooling systems, adding cost and operational complexity.
Cooling approaches
Effective cooling has become crucial in large-scale mining:
Air: The most economical and easiest to implement, yet loud and less power-dense.
Immersion: Submerges rigs in dielectric fluid, improving uptime and overclocking potential; farms like Riot’s Rockdale dedicate entire halls to this method.
Hydro: Closed-loop water systems integrated into the machines, providing peak efficiency but necessitating significant infrastructure investment.
Fleet strategy
Mining economics can fluctuate rapidly, leading operators to adjust their fleets through both hardware choices and firmware optimization:
Low-power (underclocking): Decreases output but enhances efficiency, ideal during periods of weak Bitcoin hashprice (revenue per compute unit).
Overclocking: Sacrifices efficiency for greater throughput, utilized when BTC’s price or transaction fees rise.
The golden rule in 2025 is that efficiency takes precedence over sheer power, unless you have access to ultra-cheap, dependable electricity justifying higher consumption.
Pools, payouts and hashprice
Almost all miners today direct their machines to pools, which aggregate hashrate from numerous participants.
Pools stabilize earnings: instead of waiting to personally “win” a block, miners receive consistent payouts based on their proportional share.
A few major pools, including Foundry USA, AntPool, F2Pool, and ViaBTC, dominate the network. Their activities are easy to monitor on live dashboards showing which pool mined the newest block.
How pools pay
Pay-per-share (PPS) and full pay-per-share (FPPS): Provide reliable payouts for every share submitted, with FPPS including an estimate for transaction fees. Pay-per-last-N-shares (PPLNS): Riskier, as rewards only arrive when the pool successfully finds blocks — this method is more variable but can yield better returns.
The choice hinges on whether you prefer predictable cash flow (PPS/FPPS) or can withstand volatility for potential rewards (PPLNS).
Hashprice: The miner’s key metric
Miner income is typically assessed via hashprice, the USD earned per petahash of hashrate per day. Hashprice increases with Bitcoin’s price and transaction fees but decreases as network difficulty rises.
As of October 2025, the current hashprice hovered around $51 per petahash per second per day. Break-even points vary significantly based on machine efficiency and electricity costs, which is why miners with affordable or adaptable power agreements tend to thrive during downturns.
Did you know? Bitcoin miners hedge similarly to energy firms. By employing tools like hashrate forwards and fixed-payout contracts, they can secure future revenue instead of being impacted by hashprice volatility.
Energy and geography
Energy costs, local grid policies, and geographical factors dictate which miners remain profitable and which are forced out.
How much energy does Bitcoin use?
It varies depending on the source.
In May 2025, Digiconomist estimated Bitcoin’s annualized electricity consumption at around 190 terawatt-hours: similar to the yearly power usage of a mid-sized nation like Poland or Thailand.
Some estimates, including data from the Cambridge Bitcoin Electricity Consumption Index, indicate Bitcoin accounts for about 0.8% of global electricity consumption.
In the United States, government data suggests crypto mining represents between 0.6% and 2.3% of national power demand.
Miners as flexible power users
It’s crucial to recognize that miners act as flexible loads on the grid.
In Texas, for instance, the Electric Reliability Council of Texas compensates miners to reduce power consumption during peak periods.
Riot Platforms revealed that in August 2023, these demand-response credits were worth an equivalent of 1,136 BTC. Naturally, interruptible power agreements can dramatically affect mining economics.
Where the machines are
Following China’s 2021 ban on crypto mining, a significant portion of displaced capacity relocated to regions rich in energy resources.
Texas emerged as a main hub, while Canadian provinces with hydroelectric power and natural gas also attracted considerable deployments.
By 2025, public mining firms operated an estimated 7.4 gigawatts of capacity across the US and Canada.
The decisive factors are clear: inexpensive and stable energy, favorable regulations, and grid programs that financially incentivize miners to act as flexible loads by curtailing during peak demand.
