Bitcoin Mining: How It Works & How to get started in 2025
How does Bitcoin mining work and how to start it in 2025? In this article, we will explain in detail what the mining business is today and how to mine bitcoins daily.
What is Bitcoin mining?
To understand what Bitcoin mining is, you can imagine a competition of specialized computers that calculate very complex mathematical functions for a reward. This process is so complicated that, on the one hand, it protects the Bitcoin network from hacking, because the cost of hacking exceeds the potential profit, and on the other hand, it involves increasingly more new players and keeps growing even more complicated. The entrance fee for this competition is the cost of electricity.
Bitcoin mining is based on a Proof-of-Work algorithm: miners prove by their calculations and their investments in electricity the correctness of the information about BTC transactions entered into the Bitcoin network. Mining rewards and commission payouts from each transaction are a motivation system for miners so that the process does not stop.
A unique personality, a group of enthusiasts, or special services created this protocol under the name Satoshi Nakamoto, after which Bitcoin went on to live its own independent life, and Satoshi himself safely left the public space - his last message dates back to April 12, 2011. Nakamoto-related wallets are believed to hold between 600k and 1.1M BTC mined back in 2009-2010.
Today, the average user does not need to understand the technical details of how Bitcoin mining works. The fact is that entry into this market has long been closed to enthusiasts - today it is the business of large corporations. But there is a way in! You can mine bitcoins in a large data center on hosting terms, the cost of which is included in the contract. It is more rational for a private user to work with ready-made facilities than to try to create his own company from scratch, which will clearly be uncompetitive. Cuverse offers the former approach and takes full responsibility for the maintenance of your mining facilities!
How the Bitcoin mining process works
The Bitcoin blockchain is a database consisting of blocks, where each subsequent block contains encrypted information about the previous one. This ledger structure makes it impossible to make retroactive changes, as that would require altering the information in all subsequent blocks. Miners fill each block with information about transactions occurring on the Bitcoin network, collecting them from the mempool, where transactions await validation by miners. For this, miners earn fees (the higher the fee, the faster the transaction is included in a block). During periods of high network activity, the amount earned from fees can significantly exceed the block reward itself.
The hash
In Bitcoin mining, a hash is a 64-character hexadecimal string encoded with 256 bits (the Bitcoin mining algorithm is called SHA-256). The image above shows the hash of block #840,000: 0000000000000000000320283a032748cef8227873ff4872689bf23f1cda83a5.
In general terms, the mining process boils down to finding a hash by enumerating its possible values based on the current Bitcoin network difficulty. The miner who finds the required hash receives the reward. This happens approximately once every 10 minutes. The more miners join Bitcoin mining, the higher the probability of calculating the hash faster than in 10 minutes, and vice versa. Every two weeks (2016 blocks), the Bitcoin network automatically reviews the difficulty, adjusting the hash's complexity to keep the block discovery time constant.
Hash computation is a continuous, energy-intensive process paid for by miners through their electricity costs, which are necessary to power the computing hardware. It is the core concept behind Bitcoin and certain other cryptocurrencies (e.g., DOGE) - Proof-of-Work. Miners prove the validity of their computations through this work. Via hashing, each block is linked to the previous one. Together, the blocks form a blockchain that is resistant to hacking because to retroactively change information about just one transaction on the Bitcoin network, one would need to recalculate the hashes of that block and all subsequent blocks, which is unrealistic from an energy cost perspective.
Target hash and nonce
The Target Hash and Nonce are the parameters of a cryptographic puzzle. By iterating values through Nonce and substituting them into the current block's header, miners attempt to guess the Target Hash value to receive the mining reward. The Bitcoin network's difficulty (computational complexity) depends on the total network hash rate (the volume of computational power engaged in mining) and is adjusted every two weeks to ensure that achieving the target hash takes approximately 10 minutes.
The word Nonce is derived from the phrase "Number Used Once," meaning it is used randomly once and only once. The security of cryptographic operations is based on the uniqueness of the Nonce, which presents an insurmountable problem for an attack on the blockchain.
The Nonce is part of every transaction in the blockchain and is added to its data. The hash function is then calculated using the SHA-256 hashing (encryption) algorithm. If this value matches the Target Hash, the task of finding the block is solved successfully, the block is added to the blockchain, and the miner receives the reward. This principle is inherent to the mining of all Proof-of-Work cryptocurrencies; only the hashing algorithm differs. In Bitcoin's case, it is SHA-256, while for Dogecoin, e.g., it is Scrypt. These algorithms are always specified on mining calculators like asicminervalue.com.
Hash example
A hash is the result of encryption using the SHA-256 algorithm. The result of hashing is always a 64-digit hexadecimal number, where each character is encoded with digits from 0 to 9 or letters from A to F. Even if just one character in the original phrase is changed, the resulting hash changes completely. A hash may look like this: 0000000000000000000320283a032748cef8227873ff4872689bf23f1cda83a5
This string corresponds to the hash of block #840,000 in the Bitcoin blockchain.
The more zeros in the leading positions of the hash, the lower the difficulty of its computation, as miners need to enumerate fewer possibilities. If a non-zero digit is added to the Target Hash, the computational difficulty increases because the number of possible hash variants grows exponentially.
Why Bitcoin needs miners
The Bitcoin blockchain is an ever-growing database of transactions that need to be confirmed and included in blocks. Miners are a decentralized community of computational power owners who perform calculations with the goal of winning this competition — to find the required hash, add the corresponding block to the blockchain, and fill it with transactions. For this, miners pay with the electrical power they use, "proving the validity of their computations through work." It is the energy-intensive nature of the computational process of Blockchain mining that underlies the blockchain's high security against hacking and indirectly determines the value of bitcoin itself, since during periods of market stability, it cannot be cheaper than its production cost.
Why mine Bitcoin?
The Bitcoin blockchain is built on a deflationary model. This means there is a finite number of bitcoins, and thus their value will increase as the rate of new coin issuance decreases. Only 21 million BTC can ever be mined. Every four years, a so-called halving occurs, which refers to the halving of the reward for a mined block (for finding the target hash).
Typically, a few months after a halving, the price of bitcoin begins to rise. This is linked to the halving of mining profitability, which leads to the accumulation of bitcoins and a reduction in their market supply. Imagine a transition to hard-to-recover oil reserves—no one would sell it for less than its production cost unless forced to cover debts. The same applies to bitcoin.
A halving is a transition to hard-to-mine bitcoin reserves. Miners start selling their bitcoin holdings during significant market downturns when mining becomes unprofitable to cover their costs. However, the situation always recovers, the bitcoin price starts rising again, and miners start accumulating bitcoins again.
How long does it take to mine 1 bitcoin?
In the Bitcoin blockchain, a reward is issued for each mined block. This occurs approximately once every 10 minutes. In modern mining, the largest mining pools typically collect all rewards, subsequently distributing them to their participants proportionally to their contributed computational power.
Since 2024, the block reward has been 3.125 BTC. In 2028, it will halve again to 1.5625 BTC, and so on.
Thus, the Bitcoin network pays out 3.125 BTC every 10 minutes—this is how new bitcoin is emitted. It's logical to ask how long it takes to earn 1 BTC. However, the point is that even a large mining pool cannot guarantee the mining of every block, meaning its results will be averaged alongside the contribution to the total mining output from other pools.
Today, mining 1 Bitcoin is an unattainable task today for an individual miner, as the probability of such an event is proportional to the miner's hash rate.
What you need to mine Bitcoin
Blockchain mining on graphics cards (GPU) ceased to be profitable back in 2012. Today, Bitcoin mining is so complex that it requires the use of specialized ASIC equipment. This hardware is produced by major manufacturers who fiercely compete for their market share by offering increasingly energy-efficient models. The more energy-efficient the miner, the lower the cost of each mined bitcoin; however, the price of such equipment is higher, meaning it will have a longer payback period.
Simply put, for Bitcoin blockchain mining, you would need to buy and set up ASIC miners, connect them to a "cheap power outlet," the Internet, and a mining pool, pay for electricity, and tirelessly monitor their operation. However, it's not that simple, because mining is a competitive process, and big business is already in the lead. Under these circumstances, you will most likely be balancing on the edge of profitability, as you cannot compete with large companies when it comes to operational expenses. Consequently, the cost of each bitcoin you mine will always be higher, and your profit lower.
Large mining corporations have the ability to raise capital and purchase the most advanced miner models to operate them for as long as possible. Thus, they increase capital investment in mining infrastructure but significantly reduce operational costs. Small mining companies cannot afford this approach, so their miners are always less advanced, and their OPEX is higher. During market downturns, such companies are the first to fail, either going bankrupt or becoming easy prey for large corporations through acquisitions. The fate of private enthusiasts in this landscape is even more dismal.
Mining hardware
When Bitcoin first appeared, it could be mined even on a regular computer. Graphics cards proved to be the most suitable resource for Bitcoin mining. However, that time is long gone, having ended back in 2012.
Today, mining equipment consists of specialized ASIC computers, produced by global industry leaders specifically for Bitcoin mining: Bitmain, Canaan, MicroBT, and others. ASICs are becoming increasingly energy-efficient, expensive, and complex because mining bitcoin is growing more difficult. The market demands ever more advanced equipment to maintain the profitability of machine mining at a decent level. As mining difficulty increases, equipment becomes obsolete and loses its profitability. Old miners are replaced by new, more energy-efficient ones.
Cuverse offers a wide range of miners from leading global manufacturers, with Antminer by Bitmain in the lead. These are very reliable and energy-efficient machines from which you can build a highly respectable mining farm, and we will handle its maintenance to ensure your mining is never interrupted.
Cuverse offers miners across a broad spectrum of hash rate and energy efficiency values. This means you can build a mining farm or select the optimal model based on your vision of mining efficiency.
Mining pools
It is impossible to earn on Bitcoin mining without connecting to a mining pool, since mining is a competitive process where your competitors are huge miner collectives (mining pools). As a solo miner, you would always be the loser.
Connecting to a mining pool allows you to ensure a stable income. Thanks to their computational power, mining pools regularly mine bitcoins and distribute them among their participants proportionally to their contribution. Each mining pool sets its own fee size and payment method. Typically, bitcoins are distributed once a day and transferred in a single transaction to all of the participants' addresses. The larger the pool, the more frequent but smaller the payouts. The smaller the pool, the larger but less frequent the payouts.
Downsides of mining
In 2021, Elon Musk commented on the environmental unfriendliness of bitcoin mining, after which a major growth phase concluded with an ATH of $69k. This was followed by several years of the so-called "crypto winter."
The environmental friendliness of Bitcoin and bitcoin mining in general is a speculative topic, as numerous analytical reports suggest that virtually any global industry consumes an order of magnitude more resources and pollutes the environment. Even today, Bitcoin's share of global energy consumption is only 0.5%. Consider the entire banking sector with its heated offices, volumes of paper (trees) consumed, etc., or imagine the woodworking industry or metallurgy burning megatons of coal in furnaces—no one talks about this because it is familiar. We are accustomed to using the benefits of civilization and aren’t usually ready to consider that thick stack of white paper in a trash bin is a problem.
Bitcoin—as a new artefact—found itself at the epicenter of the environmental discussion simply because it couldn't have been otherwise. However, since 2021, it has come a long way, and according to a 2024 report by the Cambridge Centre for Alternative Finance (CCAF), over 52% of the energy used in bitcoin mining came from renewable sources (with nearly 10% coming from nuclear power).
Where is Bitcoin mining illegal?
Bitcoin mining is a relatively new industry, and in many countries, the corresponding legislation is either vague or at an intermediate stage. UAE boasts the most favorable mining-related legislation, with zero tax rates applied to cryptocurrency activities.
BTC mining varies by country/region; check the local rules on energy, licensing, and taxation before committing your capital.
Until 2021, China was the leader in the mining sphere, but then the authorities abruptly revised their stance, and mining was completely banned. This caused the largest drop in the Bitcoin network's difficulty in recent times; however, it quickly recovered as Chinese miners relocated to other jurisdictions.
Mining requires significant electricity consumption, which is why many countries and regions prohibit it due to a lack of resources. At the same time, in Bhutan and El Salvador, mining is a state-level initiative. These governments are using renewable energy sources to mine bitcoin for state reserves.
Can a regular person mine Bitcoin?
Today, the mining market is effectively closed to the average individual. This is due to the intense competition from large mining corporations: mining is now a big business. Virtually all block rewards (mining rewards) are now claimed by the largest mining pools and distributed proportionally to participants' hash rate. The likelihood of a solo miner finding a block and receiving the full reward is extremely low. Therefore, the most cost-effective solution for entering this market is hosted mining, as offered by Cuverse. You select and purchase miner models, sign a professional hosting contract, and earn all the mined bitcoin, while Cuverse ensures the stable operation of your equipment.
Can Bitcoin mining be traced?
All information about BTC transactions is contained in the Bitcoin blockchain and cannot be deleted or retroactively altered. Each transaction has its own TxID and is linked to wallet addresses. A wallet address cannot be directly linked to a specific owner unless they provide their details during registration (for instance, when undergoing KYC procedures on an exchange). Therefore, analysts typically track the behavior of large wallet holders without knowing their real-world identities.
Miners' wallets are no exception; they can be easily monitored on the blockchain without being linked to specific individuals.
Is Bitcoin mining profitable?
Earnings in cryptocurrency mining depend on the cost of capital and operational expenditures—namely, the price of the miner and the electricity cost. To assess profitability, you can use a mining calculator, such as asicminervalue.com.
For example*, let's look at the popular Bitmain Antminer S21 XP (270 TH).
*This information is not financial advice and is presented for illustrative purposes only.
Daily Net Profit = Daily Mining Revenue – Electricity Costs – Other Costs (pool fee, maintenance)
At an electricity price of $0.04/kWh, the calculator shows a daily net profit of approximately $7.58 with a Bitcoin price around $100k. With a miner cost of $5k, it would pay for itself in about 1 year and 10 months, and then continue to generate profit for another couple of years. This estimate is quite conditional, as the Bitcoin market is volatile, and factors like the Bitcoin network difficulty affecting profitability, equipment reliability, fluctuations in electricity costs, etc., come into play. However, this approach provides a comparative baseline, all else being equal, and allows for an approximate assessment of specific hardware’s mining prospects .
Cuverse offers long-term contracts for advanced miner models across various price ranges. By choosing a single miner or building an entire farm with different models, you will earn bitcoin daily, paying only for the electricity used by your miners hosted in the Cuverse data center under free hosting terms. This is convenient because you don't need to handle the technical issues — just monitor your profitability through a convenient dashboard from anywhere in the world, while we centrally maintain your equipment and make sure your mining operation never stops.
Taxes on Bitcoin mining
Bitcoin mining is regulated by law; entrepreneurs and companies are required to pay taxes on their activities. In the United States, mining is regulated at the state level. Miners pay between 10% and 37% in income tax, as well as the capital gains tax when there is a profit from the sale of mined bitcoins. A similar situation exists in the United Kingdom, where income tax can range from 0% to 45% and is supplemented by an 18-24% capital gains tax on the sale of BTC.
The UAE is the most attractive jurisdiction for mining and cryptocurrency operations, featuring zero taxation. Legislation in Hong Kong is also liberal; however, a profits tax applies to mining as a business, whereas private mining is not subject to this tax.
In Germany, commercial mining is subject to business income tax. If bitcoins are held for over a year, they are exempt from tax upon sale. In Switzerland, for private investors, capital gains from the sale of crypto-assets are not taxed; otherwise, commercial mining is regulated by the cantons, which set their own tax rates.
The bottom line
Therefore, starting to mine Bitcoin does not require building your own infrastructure and bearing all the risks of maintaining its operability over the long term.
Home mining is significantly riskier than mining on equipment hosted in a large data center under professional hosting terms, as all technical issues in this case are handled by the provider company. Thus, you can own ASICs and give them your full attention at home, or you can monitor their profitability from anywhere in the world, knowing that they are cared for by professionals.
Bitcoin mining is an extremely energy-intensive process that requires constant attention and the work of numerous and diverse specialists. Only large companies like Cuverse possess these capabilities. We have an advantage in accessing cheap electricity, we purchase mining equipment in bulk at low prices and optimize logistics, we build vast facilities where miners are provided with reliable cooling, do not overheat, and fully utilize their operational lifespan, and we clean them and replace them with more up-to-date models as they wear out or become unprofitable.
For an individual miner, this approach is virtually unattainable. Cuverse offers a rational path for partnership between a private individual and large-scale mining business. You purchase a miner contract and pay for electricity, and we ensure continuous operation, maintain the equipment, and do everything to make your mining successful throughout the entire contract term.
This is profitable for you because you avoid additional costs and risks. It is profitable for us because we attract capital for expanding our mining infrastructure. You earn all the bitcoin mined by your equipment, and we put new miner models into operation!
Join Cuverse and let's mine bitcoin together
FAQ
How to start Bitcoin mining?
To start Bitcoin mining, it is not enough to simply buy an ASIC and power it up. Access to cheap electricity, affordable facility space, a cooling system for the ASICs, security, a high-quality internet connection, and many other factors play a huge role. This is called mining infrastructure. Large companies spend enormous resources on developing and maintaining it to ensure mining remains highly profitable over the long term, allowing each miner to pay for itself (which takes 1.5-2 years on average) and subsequently generate significant profit!
Cuverse knows everything about how Bitcoin is mined and offers a ready-made mining infrastructure that you can use under free mining equipment hosting terms. You can mine Bitcoin in our data centers, paying for electricity, while we centrally maintain your equipment. Today, this is the best form of partnership for both individual and large-scale miners because everyone wins.
What is Bitcoin mining?
Bitcoin mining is the operation of computational power with the goal of obtaining a mining reward. Within this process lies the functionality of maintaining the Bitcoin network as a distributed ledger (blockchain) and a payment system, where information about all network transactions is open to everyone but cannot be deleted or retroactively altered.
From this perspective, Bitcoin mining is the process of confirming and recording each transaction in a block using cryptographic encryption. The Bitcoin network challenges miners to solve the mathematical problem of finding a block for a reward, and the winner then populates each block with transaction information for additional fees. This is a continuous process that "fuels itself" due to the miners' motivation and the extremely high level of trust in the Bitcoin network.
How can I mine Bitcoin myself?
Individual mining is no longer relevant or competitive, as Bitcoin mining has long been dominated by large corporations. Today, the best way for an enthusiast to start mining is to operate equipment hosted in a large data center.
Cuverse offers a wide range of mining hardware under free hosting terms. You pay for the equipment contract and electricity at a fixed rate, and you keep all the mined bitcoin. This is profitable because it requires no investment in infrastructure from you, no technical knowledge, and no time spent on maintaining a mining farm—the provider company handles these issues.
What is a mining pool?
Virtually all mining rewards today are earned by the largest mining pools. A mining pool is an aggregation of users' mining power for greater competitiveness. The higher the hash rate (computational power), the higher the probability of receiving a mining reward. All bitcoins mined by the mining pool are distributed among its users proportionally to their contributed hash rate. This is profitable because you earn a profit daily.
Is Bitcoin mining worth it?
Undoubtedly, Bitcoin mining is worth it; however, it is a long-term business requiring significant investment in mining infrastructure. Today, only large corporations like Cuverse can afford this approach. A strategic focus allows for reducing costs and achieving the highest mining profitability (the lowest production cost for 1 BTC).
What do you need to mine Bitcoin?
There is only one viable path for successful Bitcoin mining today: to mine bitcoin using equipment hosted in a large, centrally managed data center of a major mining company. Cuverse offers profitable miner contracts and the opportunity to mine bitcoin under free equipment hosting terms. This means your miners will be maintained by professionals, and you won't have to deal with their repair or configuration. Pay for electricity daily and mine bitcoin with your miners, serviced by Cuverse. It's profitable and promising!
Can you mine Bitcoin at home?
Home-based mining lost its relevance back in 2012 when GPU mining became unprofitable. Since then, Bitcoin mining has only been feasible on specialized equipment—ASIC miners. Placing such miners at home is not the best idea, as their operation is very noisy, they require a professional cooling system and consume enormous amounts of electricity. The best option for individual mining is to host your equipment in large data centers under free hosting terms. Cuverse offers you the chance to forget about noise and technical problems.
Is it illegal to mine?
Bitcoin mining is illegal in only a few countries. Typically, mining is regulated by local legislation and requires tax payments. If you decide to engage in individual mining, you should study the laws of your country or region and weigh all the pros and cons.
By mining Bitcoin in Cuverse data centers, you are relieved from the need to handle the technical and legal issues associated with bitcoin mining—Cuverse specialists will take care of that. Mining with equipment hosted in a specialized data center is the optimal solution in terms of labor costs and profitability, as you don't spend time and resources ensuring the process's continuity, reliability, and profitability.
Join Bitcoin mining using Cuverse's infrastructure, and you will appreciate how simple, convenient, and profitable it is!