Mining is the engine that powers Bitcoin — the process that validates transactions, secures the network, and issues new bitcoin. This guide covers how mining works, from Proof of Work and difficulty adjustments to mining pools, Stratum V2, home mining, and the energy debate.
Contents
- What is Bitcoin mining?
- How mining works
- Mining hardware
- Mining pools
- Mining economics
- Mining, energy, and the environment
- Mining geopolitics
- Running a full node
- Further reading
What is Bitcoin mining?
Mining is the process by which the Bitcoin network validates transactions and adds them to the blockchain. Miners compete to solve a computational puzzle — finding a hash that meets a specific target — and the winner earns the right to add the next block, collecting the block reward and transaction fees.
It is simultaneously:
- A security system: mining makes the blockchain tamper-resistant by requiring enormous energy expenditure to rewrite history
- An issuance mechanism: new bitcoin enter circulation only through mining rewards
- A decentralized consensus: miners converge on a single version of the transaction history without any central authority
Mining is often misunderstood as “solving complex math problems.” It is more accurately described as a competitive lottery: each attempt to find a valid hash is an independent random trial, and the probability of success is proportional to the computational power deployed.
→ *Read the full article: Mining: global competition in a roll of the dice*
How mining works
Proof of Work
Proof of Work (PoW) is the mechanism that gives mining its security properties. A miner must find a nonce that, when combined with the block header and hashed through SHA-256 twice, produces an output below the current difficulty target.
This requires trillions of hash attempts per second across the network, but verifying a valid result takes a single computation. The asymmetry — hard to produce, trivial to verify — is what makes the system work.
PoW creates a thermodynamic anchor for Bitcoin’s digital ledger: the history recorded on the blockchain represents real energy expenditure, making it expensive to rewrite and therefore trustworthy.
→ *Read the full article: What is Proof-of-Work?*
The difficulty adjustment
Every 2,016 blocks (~2 weeks), the Bitcoin protocol automatically adjusts the mining difficulty to maintain an average block time of ~10 minutes. If blocks are being found too quickly (more miners have joined), difficulty increases. If too slowly (miners have left), it decreases.
This self-regulating mechanism ensures that Bitcoin’s issuance schedule remains predictable regardless of how much or how little computational power is directed at the network. It also means that mining profitability is inherently cyclical: when mining is profitable, more miners join, difficulty increases, and profitability falls — until the least efficient miners drop off and the cycle resets.
The difficulty adjustment is one of Bitcoin’s most elegant design features. It ensures that the network functions regardless of whether the hashrate is 1 TH/s or 1 ZH/s.
Block rewards and the halving
Miners are compensated through:
- The block reward: newly created bitcoin, currently 3.125 BTC per block (since the April 2024 halving)
- Transaction fees: paid by users to have their transactions included in the next block
The block reward halves every 210,000 blocks (~4 years). This halving schedule means that Bitcoin’s total supply asymptotically approaches 21 million — a milestone that the supply recently reached at 20 million units, with the remaining 1 million to be mined over the next ~115 years.
As block rewards diminish, transaction fees will become an increasingly important component of miner revenue. This transition is fundamental to Bitcoin’s long-term security model.
→ *Read the full article: Bitcoin supply reaches 20 million units*
Mining hardware
From CPUs to ASICs
Bitcoin mining began on ordinary CPUs in 2009. As the network grew, mining moved to GPUs (2010), then FPGAs (2011), and finally to ASICs (Application-Specific Integrated Circuits) starting in 2013. Each generation offered orders-of-magnitude improvements in hash rate per watt.
Today, ASIC mining is the only economically viable approach. Modern ASICs are purpose-built chips that do one thing — compute SHA-256 hashes — with extraordinary efficiency. The leading manufacturers are Bitmain (Antminer series), MicroBT (Whatsminer), Canaan (Avalon), and Bitdeer (SEALMINER).
The ASIC landscape today
The current generation of ASICs achieves efficiencies around 12-15 J/TH (joules per terahash). Canaan’s Avalon A16 series reaches 12.8 J/TH. Bitdeer’s SEALMINER production has surpassed 65 EH/s of deployed capacity. Block (Jack Dorsey’s company) has entered the space with Proto Rig and Proto Fleet, aiming to democratize mining hardware.
The race for efficiency is relentless: each improvement in J/TH translates directly into competitive advantage, as the most efficient miners survive longest when prices drop or difficulty rises.
→ *Read the full articles: Canaan launches Avalon A16 · Bitdeer: SEALMINER surpasses 65 EH/s · Block presents Proto Rig and Proto Fleet*
Home mining: the Bitcoin lottery
Home mining has experienced a renaissance thanks to devices like the Bitaxe — open-source, low-power ASIC miners designed for individual use. A Bitaxe won’t make you rich (a single unit produces a tiny fraction of the network hashrate), but it represents something more valuable: participation in Bitcoin’s decentralization.
Home mining is often described as “the Bitcoin lottery” — the odds of finding a block solo are minuscule, but the cost of playing is low (a few watts of electricity), and when someone wins, the payout is substantial.
Beyond the lottery analogy, home mining serves a philosophical purpose: it distributes hashrate geographically, reducing concentration and increasing the network’s resilience against coordinated attacks or regulatory crackdowns.
Devices like FutureBit’s Apollo III continue to lower the barrier to entry for home miners.
→ *Read the full articles: Bitaxe Gamma: configuration guide · Home mining: the Bitcoin lottery · FutureBit unveils Apollo III*
Mining pools
Why pools exist
The probability of a solo miner finding a block is proportional to their share of the total network hashrate. With global hashrate exceeding 1 ZH/s, even large mining operations would face months or years between successful blocks if mining solo.
Mining pools solve this by combining the hashrate of many miners, finding blocks more frequently, and distributing rewards proportionally. Pools reduce variance: instead of a large payout every few months (or years), miners receive small, regular payments.
However, pool centralization is a concern. If a few pools control most of the hashrate, they gain disproportionate influence over which transactions get included in blocks — a form of soft censorship.
Ocean: the non-custodial pool
Ocean, launched by Jack Dorsey’s Block, introduced a different model: a non-custodial mining pool where miners receive payouts directly in the coinbase transaction — no pool wallet holding their funds. Ocean also integrates Lightning payouts via BOLT12.
The non-custodial model eliminates counterparty risk: miners are not trusting the pool operator with their earnings. Ocean has also taken a principled stance on block content, sparking debates about transaction filtering and censorship resistance in mining.
→ *Read the full articles: Meet Ocean, the non-custodial mining pool · Ocean announces DATUM*
Stratum V2: decentralizing block construction
Stratum V2 is a next-generation mining protocol that fundamentally changes the relationship between miners and pools. In the current model (Stratum V1), the pool decides which transactions to include in a block. Miners provide hashrate but have no say in block content.
Stratum V2 allows individual miners to construct their own block templates, choosing which transactions to include. The pool still coordinates the work distribution and reward sharing, but block construction is decentralized.
This is a significant improvement for censorship resistance: even if a pool operator wanted to exclude certain transactions, individual miners using Stratum V2 could include them. Studies show that Stratum V2 also increases miner profits by ~7.4% through more efficient communication and reduced latency.
Demand Pool was the first mining pool built natively on Stratum V2. Auradine has brought native Stratum V2 support to its Teraflux miners at the hardware level.
→ *Read the full articles: Stratum V2 is born · Stratum V2 increases profits by 7.4% · Demand Pool’s CEO on Stratum V2 · Auradine brings native Stratum V2*
Mining economics
Profitability and the hashrate cycle
Mining profitability follows a cyclical pattern driven by three variables: Bitcoin’s price, the network difficulty, and energy costs. After each halving, the block reward drops 50%, compressing margins. The least efficient miners shut down, difficulty adjusts downward, and the cycle begins again.
This dynamic creates natural selection pressure: only the most efficient operations — with the cheapest energy and the most efficient hardware — survive long-term. The difficulty reaching all-time highs while profitability declines is a recurring pattern.
→ *Read the full articles: Mining profitability continues to decline · Mining sees record profits in July · Mining difficulty plunges 11%*
The 1 Zettahash milestone
In 2025, Bitcoin’s hashrate reached 1 Zettahash per second (1 ZH/s) — 1,000 exahashes, or 10²¹ hashes per second. To put this in perspective: it means the entire network performs more computations per second than there are grains of sand on Earth, multiplied by a factor of billions.
This milestone represents an extraordinary amount of energy dedicated to securing the Bitcoin ledger. It makes a 51% attack — the theoretical scenario where a single entity controls majority hashrate — practically impossible at any cost.
→ *Read the full article: Bitcoin hashrate reaches 1 Zettahash*
Solo mining: still possible?
Against all odds, solo miners occasionally find blocks. In a notable 2025 case, a solo miner earned $200,000 by finding a block with just $75 worth of rented hash power — the equivalent of winning the lottery.
These events are statistical outliers, not a viable business strategy. But they demonstrate an important property: Bitcoin mining remains permissionless. Anyone can participate, and the protocol treats every valid hash equally regardless of who computed it.
→ *Read the full article: Solo miner earns $200,000 with $75 of rented hash power*
Mining, energy, and the environment
The energy debate
Bitcoin mining consumes significant energy — by design. Proof of Work requires energy expenditure to function, and this cost is what makes the blockchain secure. The question is not whether Bitcoin uses energy, but whether the use case justifies it.
The debate is often framed misleadingly. Key data points:
- Coal usage in Bitcoin mining has dropped 43% since 2011
- Bitcoin mining increasingly uses renewable and stranded energy sources
- The traditional financial system’s energy footprint — offices, data centers, ATMs, armored transport, military enforcement — is rarely included in the comparison
Daniel Batten’s research characterizes Bitcoin as “the ultimate ESG asset,” arguing that mining incentivizes renewable energy development and methane mitigation.
→ *Read the full articles: Bitcoin mining: coal usage down 43% · Daniel Batten: “Bitcoin is the ultimate ESG asset”*
Stranded and renewable energy
Miners are economically incentivized to seek the cheapest energy available — which is often stranded or wasted energy that has no other buyer:
- Flared gas: natural gas that would otherwise be burned into the atmosphere at oil wells. The FLARE Act in Texas formalizes the use of flaring and venting gas for mining
- Excess hydroelectric: during wet seasons, dams produce more power than grids can absorb
- Solar surpluses: Engie, one of the world’s largest energy companies, is evaluating Bitcoin mining for its mega solar plant in Brazil
- Geothermal: volcanic energy in countries like El Salvador and Iceland
Canaan has launched facilities in Canada powered by excess gas. Mining operations can be deployed anywhere there is cheap energy — they are the ultimate buyer of last resort for stranded power.
→ *Read the full articles: The FLARE Act · Engie evaluates mining for solar plant · Canaan: new facility powered by excess gas*
Mining as a grid tool
An underappreciated property of Bitcoin mining: it is the most interruptible large-scale electrical load in existence. Mining operations can be shut down in seconds when grid demand peaks, freeing energy for residential and industrial use.
This makes mining a potential demand response resource — a flexible load that stabilizes power grids. In Texas, miners have repeatedly curtailed operations during winter storms and summer heat waves, demonstrating this property in practice.
Some operations are exploring residential heating with mining: the waste heat from ASICs can be used for space heating, turning an energy “cost” into a dual-purpose expenditure.
→ *Read the full articles: Texas: cold winter challenges Bitcoin mining · Residential heating with Bitcoin mining · The future of mining: green and decentralized*
Mining and AI: allies or competitors?
The rapid expansion of AI data centers has created a new dynamic in the energy landscape. Mining and AI operations compete for cheap electricity, but they also share infrastructure and can coexist — mining as a flexible, interruptible load that complements AI’s constant power demand.
Some mining companies are pivoting to AI hosting, using their existing power purchase agreements and cooling infrastructure to serve both industries.
→ *Read the full article: Mining and AI: allies or competitors for energy?*
Mining geopolitics
China’s ban and its aftermath
China’s 2021 mining ban — which shut down the world’s largest concentration of hashrate overnight — was the most dramatic event in mining history. Over 400,000 machines were affected. The hashrate dropped 50%, then recovered within months as miners relocated to the United States, Kazakhstan, Russia, and other jurisdictions.
The ban demonstrated both Bitcoin’s resilience (the network continued operating without interruption) and the impossibility of permanently shutting down a decentralized protocol through national regulation. However, despite the ban, mining has not entirely disappeared from China — investigations by the CCP continue to uncover operations.
→ *Read the full article: China: 400,000 mining machines shut down*
Russia’s complex relationship with mining
Russia presents a paradox: it has simultaneously embraced and cracked down on Bitcoin mining. The country has launched a national mining registry, proposed prison sentences for illegal mining, and seized equipment from unauthorized operators — while also recognizing mining as a legal economic activity in designated regions.
The tension reflects Bitcoin mining’s dual nature from a state perspective: it can be a revenue source and a way to monetize surplus energy, but it also represents a parallel financial system that complicates capital controls and monetary policy.
→ *Read the full articles: Russia launches national mining registry · Russia: prison sentences proposed for illegal mining*
State-level mining
Some nations have embraced mining as a strategic activity. El Salvador launched its first mining pool (Lava Pool) as part of its broader Bitcoin strategy. Bhutan’s state-owned investment arm has been mining bitcoin using hydroelectric power, though recent outflows suggest evolving priorities. Paraguay is exploring mining with confiscated machines.
The trend toward state involvement in mining raises new questions about network decentralization and the concentration of hashrate in governmental hands.
→ *Read the full articles: Lava Pool: El Salvador’s first mining pool · Paraguay considers mining with confiscated machines*
Running a full node
While not mining per se, running a full node is the complementary activity that completes Bitcoin’s security model. Miners produce blocks; nodes verify them. A node that rejects invalid blocks — regardless of how much hashrate was used to produce them — is the ultimate check on mining power.
Running a node requires modest hardware (~1 TB storage, standard internet) and validates every transaction against the protocol’s rules independently. It is the only way to truly verify that the bitcoin you receive are genuine.
For maximum sovereignty, pair a full node with your own wallet — so every transaction you make is verified by software you control, not by a third party’s server.
→ *Read the full article: What is a Bitcoin node?*
Further reading
How mining works
- Mining: global competition in a roll of the dice
- What is Proof-of-Work?
- Bitcoin supply reaches 20 million units
Hardware and home mining
- Bitaxe Gamma: configuration guide
- Home mining: the Bitcoin lottery
- FutureBit unveils Apollo III
- Block presents Proto Rig and Proto Fleet
Mining pools and Stratum V2
- Meet Ocean, the non-custodial mining pool
- Ocean announces DATUM
- Stratum V2 is born
- Stratum V2 increases profits by 7.4%
- Demand Pool’s CEO on Stratum V2
Economics and hashrate
- Bitcoin hashrate reaches 1 Zettahash
- Solo miner earns $200,000
- Mining difficulty plunges 11%
- Mining sees record profits in July
Energy and environment
- Bitcoin mining: coal usage down 43%
- Daniel Batten: “Bitcoin is the ultimate ESG asset”
- The FLARE Act
- Residential heating with Bitcoin mining
- The future of mining: green and decentralized
- Mining and AI: allies or competitors?
Geopolitics
