What is Bitcoin mining?
Bitcoin mining is the mechanism that secures and maintains the BTC network.
Miners gather pending transactions, compile them into blocks, and continuously attempt hashing (trial and error) until they generate a hash that aligns with the network’s difficulty level.
The first miner to discover a valid solution disseminates their block. After verification by the network, this miner receives a reward.
If another miner finds the solution first, your result goes invalid, termed a “stale block,” and you must initiate a new set of transactions for the subsequent block.
As of 2025, the block reward stands at 3.125 BTC, following the halving in April 2024. Miners also collect transaction fees that vary with network congestion.
Competition is intense, with high entry barriers. Nearly all miners use specialized Application-Specific Integrated Circuit (ASIC) machines, often joining mining pools to stabilize income by sharing rewards with others.
Did you know? Many believe Bitcoin miners “solve intricate cryptographic puzzles.” In truth, there’s no puzzle; miners simply make trillions of guesses each second until one yields a hash below the network’s difficulty requirement.
How a block is actually found
Below is a detailed look at how a block is mined on the Bitcoin network:
A miner creates a candidate block using pending transactions from the mempool.
They incorporate a special “coinbase transaction” (unrelated to the Coinbase exchange), which mints new BTC and gathers transaction fees.
The miner hashes the block’s header (using SHA-256) while adjusting the nonce (a one-time number).
The objective is to generate a hash value lower than the network’s current difficulty target.
Once a valid block is discovered, the miner announces it to the network. Other nodes independently validate its proof-of-work and transactions before incorporating it into their local blockchain copy.
If two miners discover valid blocks almost simultaneously, the blockchain may temporarily split into two versions. The network resolves this when one branch accumulates more proof-of-work (PoW) and becomes the primary chain, while the other gets disregarded as a “stale” block.
This setup guarantees Bitcoin’s consensus always follows the chain with the highest accumulated work, ensuring forks are short-lived and the ledger remains resilient.
Mining rewards after the 2024 halving
Following Bitcoin’s fourth halving in April 2024, the block reward decreased from 6.25 BTC to 3.125 BTC.
This is the fixed reward that every miner competes for. With approximately 144 blocks mined daily, the network produces about 450 new BTC each day, not counting transaction fees.
The fee wildcard
Transaction fees contribute to the unpredictability of miner earnings.
Around the April 2024 halving, Bitcoin experienced a surge in activity sparked by the introduction of Runes, a new token protocol that flooded the mempool with transactions. For a brief period, transaction fees exceeded the 3.125 BTC block reward, leading some blocks to reward miners tens of BTC in fees alone—an unusual windfall compared to the usual baseline.
However, these spikes were short-lived. By mid-2025, median fees returned to normal levels as demand decreased.
This pattern is common: whenever the mempool overflows—due to new protocols, hype cycles, or major on-chain events—users outbid each other for space in Bitcoin’s limited 1 MB-4 MB block window. Once the backlog clears, bidding wars cease and fee revenue reverts to baseline.
Hashrate and difficulty
Mining power is gauged in hashrate, the overall computing power devoted to securing the Bitcoin network.
Bitcoin maintains block times close to 10 minutes by adjusting mining difficulty every 2,016 blocks, approximately every two weeks.
Here’s how this cycle operates:
When hashrate rises, blocks are produced faster than intended, prompting the next adjustment to increase difficulty.
If hashrate decreases, blocks take longer to generate, and the network lowers difficulty to balance it.
For miners, elevated difficulty equates to earning fewer BTC for the same effort. Each difficulty retarget feels like an “earnings report,” resetting revenue expectations for the upcoming two weeks.
In 2025, both hashrate and difficulty reached historic highs. New, more efficient ASIC fleets continue to come online, driving difficulty upward and pushing older rigs out of business.
Operators with high energy costs usually shut down first unless they can remain viable by securing cheaper energy or benefiting from sudden price spikes.
Bitcoin mining remains a relentless competition: only the most efficient setups survive when profit margins tighten.
Did you know? Bitcoin’s 10-minute block time was designed as a compromise: brief enough for decent confirmation times yet extended enough to minimize the likelihood of simultaneous block discoveries and chain splits.
Hardware and setups in 2025
Maximizing efficiency from each watt of power is crucial in Bitcoin mining. By 2025, the industry has evolved significantly beyond hobby setups.
The hardware miners use
Almost all modern mining farms rely on ASICs, machines specifically designed for Bitcoin. Their efficiency is expressed in joules per terahash (J/TH), indicating how much energy is needed to generate one unit of hashing power.
Air-cooled units: These remain industry workhorses — models like Bitmain’s S21 (17.5 J/TH) and MicroBT’s M60S (18.5 J/TH) dominate large farms. High-end variants such as the Bitmain S21 XP push efficiency further to around 13.5 J/TH.
Hydro and immersion rigs: These represent the cutting-edge, with models like the S21 XP Hyd rated close to 12 J/TH. They offer top performance but require specialized liquid-cooling systems, adding to costs and operational complexity.
Cooling approaches
Cooling has become a critical factor in large-scale mining:
Air: The most economical and simplest to implement, but noisy and less power-dense.
Immersion: Rigs are submerged in dielectric fluid, enhancing uptime and overclocking potential; farms like Riot’s Rockdale dedicate entire halls to this arrangement.
Hydro: Closed-loop water systems integrated into machines provide top efficiency but necessitate significant infrastructure investments.
Fleet strategy
Mining economics can fluctuate week to week, prompting operators to adjust their fleets via hardware selections and firmware optimization:
Low-power (underclocking): Decreases output while enhancing efficiency, preferable when Bitcoin’s hashprice (revenue per compute unit) is weak.
Overclocking: Exchanges efficiency for increased throughput, utilized when BTC’s price or transaction fees rise.
The golden rule in 2025 is that efficiency outweighs raw power, unless you have access to ultra-cheap, reliable electricity that justifies higher consumption.
Pools, payouts and hashprice
Today, nearly all miners direct their machines toward pools, which consolidate hashrate from thousands of contributors.
Pools ensure steadier earnings: rather than waiting to individually “win” a block, miners receive consistent payouts based on their contributed share.
Several major pools, including Foundry USA, AntPool, F2Pool, and ViaBTC, dominate the network. Their activities can be tracked on live dashboards that display which pool mined the latest block.
How pools pay
Pay-per-share (PPS) and full pay-per-share (FPPS): Provide predictable payouts for every submitted share, with FPPS including an estimate of transaction fees. Pay-per-last-N-shares (PPLNS): Riskier since rewards are only received when the pool locates blocks—a higher variance but potentially better returns.
The choice lies in whether you prefer regular cash flow (PPS/FPPS) or can handle volatility for possible rewards (PPLNS).
Hashprice: The miner’s key metric
Miner earnings are generally quantified as hashprice, the USD earned per petahash of hashrate daily. Hashprice increases with Bitcoin’s price and transaction fees but drops as network difficulty heightens.
As of October 2025, the spot hashprice was around $51 per petahash per second per day. Break-even points vary widely based on machine efficiency and electricity costs, causing miners with advantageous or flexible energy deals to withstand downturns better.
Did you know? Bitcoin miners hedge similarly to energy firms. By utilizing tools like hashrate forwards and fixed-payout contracts, they can secure future revenue rather than riding the volatility of hashprice.
Energy and geography
Energy expenses, local grid regulations, and geography determine which miners continue to be profitable and which get driven out.
How much energy does Bitcoin use?
The answer depends on who measures it.
In May 2025, Digiconomist estimated Bitcoin’s annual electricity consumption at about 190 terawatt-hours, comparable to the yearly energy use of a mid-sized nation like Poland or Thailand.
Other estimates, including data from the Cambridge Bitcoin Electricity Consumption Index, suggest Bitcoin accounts for approximately 0.8% of global electricity consumption.
In the U.S., government data indicates crypto mining comprises between 0.6% and 2.3% of national electricity demand.
Miners as flexible power users
It’s critical to recognize that miners are flexible loads on the grid.
For instance, in Texas, the Electric Reliability Council of Texas market compensates miners to power down during peak demand periods.
Riot Platforms revealed that in August 2023, these demand-response credits amounted to 1,136 BTC. Naturally, interruptible power agreements can alter mining economics.
Where the machines are
After China’s ban on crypto mining in 2021, much displaced capacity moved to areas with abundant energy resources.
Texas emerged as a key location, while Canadian provinces with hydroelectric power and natural gas also attracted significant mining operations.
By 2025, public mining firms were estimated to operate 7.4 gigawatts of capacity across the U.S. and Canada.
The primary factors are simple: inexpensive and stable energy, favorable regulatory conditions, and grid initiatives paying miners to operate as flexible loads during peak demand times.
