Key takeaways
- Bitcoin mining secures transactions and introduces new Bitcoin through proof-of-work.
- Solo, pool and cloud mining differ in control, costs and payout consistency.
- ASIC hardware, mining software, the internet and a secure wallet are essential for mining.
- Success depends on balancing costs, expertise and profitability.
Bitcoin mining is the process by which new Bitcoin is introduced into circulation, and transactions are verified and added to the blockchain ledger.
At the heart of Bitcoin mining lies the proof-of-work (PoW) consensus mechanism.
If you search for this term online, you’ll likely encounter the common but inaccurate statement that “miners compete to solve complex mathematical puzzles.”
While miners do compete, what they’re actually doing is performing rapid trial-and-error calculations until they successfully encode the data into a hash that meets the network’s requirements.
To do this, miners take the information that needs encoding — such as transaction data, the timestamp and the block header — and add random data (a value called the “nonce”) until the algorithm produces a hash that meets the target difficulty.
For example:
- 6b86b273ff34fce19d6b804eff5a3f5747ada4eaa22f1d49c01e52ddb7875b4b is too long and would not be accepted.
- 00000000000000000000956e9ff764555ad4f43724aa4eb558b1b9990d5ff1de is short enough to meet the current network difficulty and would be accepted.
On average, miners need to perform approximately 464 sextillion of these trial-and-error operations to achieve a hash with 20 leading zeroes and the correct high-order numbers.
Don’t believe us? Try encoding some information into a hash that short here, and let us know how it goes.
The first miner to encode the correct data into a suitable hash earns the right to add a new block of transactions to the blockchain and is rewarded with newly minted Bitcoin (BTC) — currently 3.125, a number that decreases with every halving event — and transaction fees.
Did you know? The mining process not only introduces new Bitcoin into circulation but also validates and secures transactions, ensuring that the same Bitcoin cannot be spent twice.
Types of Bitcoin mining
There are three main methods individuals and entities use to mine Bitcoin:
- Solo mining: An individual miner attempts to generate new blocks independently. While the rewards can be substantial, the chances of successfully mining a block are relatively low due to intense competition and high computational requirements.
- Mining pools: Miners combine their computational resources to increase the likelihood of solving PoW puzzles. When the pool successfully mines a block, the reward is distributed among participants based on their contributed computational power. This method provides more consistent, albeit smaller, payouts.
- Cloud mining: Individuals lease mining hardware or hash power from third-party providers. This approach allows participation in mining without the need to own or maintain physical equipment. However, it often involves contracts and fees, and the profitability can vary based on market conditions and the terms of the agreement.
Did you know? Pool mining is the most popular method for Bitcoin mining today. In fact, as of early 2025, the two largest mining pools, Foundry USA and Antpool, collectively control nearly 60% of the Bitcoin network’s total hashrate.
Getting started with Bitcoin mining
Unless you’re opting for cloud mining, you’ll likely have to accept the sunk costs of purchasing hardware. Application-specific integrated circuits (ASICs) are the industry standard.
In addition to the hardware itself, you’ll need to install mining software that connects your hardware to the Bitcoin network or your chosen mining pool. Commonly used options include CGMiner, BFGMiner and EasyMiner.
And, of course, you’ll need to rethink that old subscription router that cuts out without explanation.
A stable and high-speed internet connection is essential to communicate with the Bitcoin network and receive real-time data. While bandwidth requirements are modest, reliability is paramount to preventing disruptions in mining activities.
Setting up a Bitcoin wallet for mining rewards
Before you begin mining, it’s essential to have a secure Bitcoin wallet to store your mining rewards. However, the kind of wallet setup that you’ll have depends on your mining method.
For pool mining:
- What to choose: Use a non-custodial lightweight wallet (e.g., Electrum, Exodus) or a hardware wallet (e.g., Ledger, Trezor).
- Why? Pool mining doesn’t require a full node, as the pool handles most verification tasks. Lightweight wallets are easy to set up and give you full control over your funds, while hardware wallets provide secure storage if you withdraw rewards periodically.
For solo mining:
- What to choose: Bitcoin Core (full node) or a hybrid setup using Bitcoin Core with rewards transferred to a hardware wallet.
- Why? Solo miners must verify transactions and broadcast blocks themselves, making a full node essential for decentralization and privacy. Bitcoin Core offers complete control, and transferring rewards to a hardware wallet enhances long-term security.
For cloud mining, you typically need a non-custodial or custodial wallet, depending on how you prefer to access and store your earnings. Installing an entire node is not necessary.
Top ASIC miners in 2025
Whether you’re looking to solo mine or mine with a pool, selecting appropriate hardware is a critical decision that impacts your mining efficiency and profitability.
Here are some of the leading ASIC miners available in 2025:
- Bitmain Antminer S21 Pro:
- Hashrate: 234 TH/s
- Power consumption: 3,510W
- Efficiency: 15 J/TH
- Release date: July 2024
- Features: Advanced cooling system, user-friendly interface - MicroBT Whatsminer M66S:
- Hashrate: 298 TH/s
- Power consumption: 5,513W
- Efficiency: 18 J/TH
- Release date: April 2024
- Features: Robust build quality, efficient power usage - Canaan Avalon A1566:
- Hashrate: 150 TH/s
- Power consumption: 3,225W
- Efficiency: 21.5 J/TH
- Release date: March 2024
- Features: High stability, easy setup
When choosing Bitcoin mining hardware, consider the hashrate, which measures the number of calculations per second — higher rates improve block-solving chances but often mean higher costs.
Next, it’s important to get your head around energy efficiency. Measured in joules per terahash (J/TH), it determines power consumption, with lower values reducing electricity costs.
Lastly, make sure to balance the initial cost of the hardware and ongoing expenses to ensure long-term profitability.
Setup procedure for Bitcoin mining
Once you’ve selected your hardware, follow these detailed steps to set up your mining operation.
Keep in mind that the configuration process varies slightly between solo mining and pool mining, which you’ll learn in this article.
- Unbox and inspect the hardware: Carefully unbox your ASIC miner and inspect it for any physical damage, loose components or faulty connections. This is crucial to avoid performance issues once mining begins.
- Connect the power supply: Attach the correct power supply unit (PSU) to your miner, ensuring all cables are properly connected and secured. ASIC miners typically require high-wattage power supplies, so check your manufacturer’s specifications.
- Network connection: Connect your miner to the internet using an Ethernet cable. A wired connection is preferred for stability over WiFi, as interruptions in network connectivity could lead to reduced mining efficiency.
- Update the miner’s firmware: Before configuring the mining details, check for any available firmware updates from the manufacturer. Installing the latest version can enhance performance, fix bugs, and improve energy efficiency. To complete the update, follow the instructions provided on the manufacturer’s official website.
- Enter mining configuration details: The settings you enter will depend on whether you are mining alone or joining a mining pool.
For pool mining configuration
You should install mining software after setting up and updating your hardware but before configuring mining details.
For pool mining, download and install software such as CGMiner, BFGMiner or EasyMiner on your computer or directly on the miner (if applicable). Then:
- Enter the mining pool details:
- Pool URL: Provided by the mining pool (e.g., F2Pool, Antpool).
- Worker ID: Your unique identifier within the pool.
- Bitcoin wallet address: This is where the mining rewards will be sent. - Save the configuration and restart the miner: The miner will now connect to the pool and begin contributing its hash power to the shared effort.
For solo mining configuration
For solo mining, you’ll need to install Bitcoin Core (full node). Then:
- Ensure Bitcoin Core (full node) is running: Sync your Bitcoin Core full node with the entire blockchain. This process may take time if you haven’t done it already.
- Input full node connection details:
- Full node’s IP address and port: This allows the miner to communicate directly with your node.
- Bitcoin wallet address: You’ll receive the full block reward if successful. - Save the configuration and restart the miner: The miner will now start attempting to solve blocks independently, validating transactions through your full node.
Cooling and ventilation
ASIC miners generate significant heat, so proper cooling is critical. Place the miner in a well-ventilated area or consider using additional cooling equipment — e.g., external fans or industrial cooling systems — to prevent overheating and maximize performance.
Solo mining vs. pool mining vs. cloud mining
Future trends in Bitcoin mining
While saying “I mine Bitcoin” certainly has a nice ring to it and may turn heads at a bar, it’s a highly competitive industry.
Estimates show that large, well-established mining farms operating at maximum technical efficiency are enjoying substantial profit margins, while smaller miners often face tighter margins and higher risks.
The market exhibits characteristics of oligopolistic competition, where economies of scale play a crucial role in profitability. Some mining companies have even begun exploring strategies such as stockpiling mined Bitcoin to weather periods of reduced profitability.
As a result, during market downturns, smaller miners are usually the first to be priced out.
However, there may still be hope for those who are nimble and quick to adapt. Recent innovations have led to the development of more efficient ASICs that offer higher hashrates and improved energy efficiency. For instance, the introduction of 3-nanometer ASIC chips has the potential to optimize mining operations by reducing power consumption and hardware redundancies.
At the same time, the regulatory environment surrounding Bitcoin mining is becoming increasingly complex. Governments worldwide are implementing policies that significantly affect mining operations.
For example, in 2023, Russia’s government regulated and legalized cryptocurrency mining, creating a more structured framework for miners.
Regulators may also push for fair practice regulations, increased competition and further decentralization — all of which are positive developments for smaller miners.
Finally, if you’re considering entering the world of Bitcoin mining, there’s more to gain than just profit. It can also serve as a gateway to self-learning and understanding the broader ecosystem of cryptocurrencies, distributed networks and decentralized finance.
And remember, don’t take it all too seriously. There’s always the real possibility that a Redditor gets a hold of a quantum computer, runs Grover’s algorithm, and executes a 51% attack. Although that kind of thing is not predicted to happen for many years to come.
This is crypto, after all.
Written by Bradley Peak