Mining

What is Mining?

Mining is the process of using computational power to validate cryptocurrency transactions and add new blocks to a blockchain. Miners compete to solve mathematical puzzles, and the winner receives newly created coins plus transaction fees.

How Mining Works

The Process

1. Transactions broadcast to network
2. Miners collect into candidate block
3. Solve cryptographic puzzle (find valid hash)
4. First solver broadcasts block
5. Network validates
6. Block added to chain
7. Miner receives reward

What Miners Actually Do

• Run specialized software
• Compute trillions of hashes
• Race against other miners
• Consume electricity
• Maintain network security

Mining Hardware

Evolution

Era	Hardware	Efficiency
2009-2010	CPU	Very low
2010-2012	GPU	Low
2012-2013	FPGA	Medium
2013-present	ASIC	High

Current Bitcoin Mining

• ASIC (Application-Specific Integrated Circuit)
• Purpose-built for SHA-256
• Examples: Antminer S21, Whatsminer M60
• ~$5,000-15,000 per unit
• 200+ TH/s hash rate

GPU Mining

Still used for:

• Ethereum Classic
• Ravencoin
• Some altcoins
• Less profitable than ASICs for Bitcoin

Mining Economics

Revenue Sources

1. Block rewards - New coins created
2. Transaction fees - User tips

Costs

• Hardware purchase
• Electricity (biggest ongoing cost)
• Cooling systems
• Facility/housing
• Maintenance
• Internet

Profitability Calculation

Daily Revenue = (Your Hash Rate / Network Hash Rate) × Daily Block Rewards

Daily Profit = Revenue - Electricity Cost - Other Costs

Current Reality

• Bitcoin mining very competitive
• Industrial scale operations dominate
• Home mining rarely profitable
• Electricity cost is key factor

Mining Pools

What They Are

• Miners combine hash power
• Share rewards proportionally
• Consistent smaller payouts
• Vs. solo mining’s rare large payouts

Major Pools

• Foundry USA
• AntPool
• F2Pool
• ViaBTC
• Binance Pool

Payout Methods

• PPS - Pay Per Share (stable)
• PPLNS - Pay Per Last N Shares (variable)
• FPPS - Full Pay Per Share (includes fees)

Mining Difficulty

What It Is

• Adjusts how hard puzzles are
• Keeps block time consistent
• Increases with more miners
• Decreases when miners leave

Bitcoin Adjustments

• Every 2,016 blocks (~2 weeks)
• Aims for 10-minute blocks
• Self-regulating system

Energy Consumption

Bitcoin Network

• ~150 TWh annually
• More than some countries
• Controversial topic

Perspectives

Critics:

• Wasteful
• Environmental damage
• Could use renewable

Supporters:

• Secures $1T+ value
• Incentivizes renewable
• Uses stranded energy
• Necessary for security

Mining vs Staking

Aspect	Mining (PoW)	Staking (PoS)
Resource	Computation	Capital
Energy	High	Low
Entry cost	Hardware	Coins
Bitcoin	Yes	No
Ethereum	No (was)	Yes

Cloud Mining

What It Is

• Rent hash power remotely
• No hardware management
• Pay for contract

Warnings

• Many scams exist
• Often unprofitable
• Verify legitimacy carefully
• Usually better to just buy crypto

Can You Mine at Home?

Bitcoin

• Not profitable anymore
• Industrial competition too fierce
• Would lose money

Altcoins

• Some still GPU-minable
• Lower competition
• Smaller rewards
• Electric costs still matter

Better Alternatives

• Buy crypto on exchanges like Binance
• Stake proof-of-stake coins
• Provide DeFi liquidity

Mining Regulations

Varies by Location

• Some countries ban mining
• Others welcome it
• Taxation varies
• Energy restrictions possible

Tax Implications

• Mining income is taxable
• At fair market value when received
• Business expense deductions possible
• Consult tax professional