How to mine cryptocurrencies

Mining is the process of producing new blocks on a Proof-of-Work blockchain. Miners compete to solve a computational puzzle. The first miner to find a valid solution gets to add the next block to the chain and receives a block reward in the chain's native asset. This is how new Bitcoin enters circulation, and historically how new Ethereum entered circulation (Ethereum migrated to Proof-of-Stake in September 2022, ending mining there).

For Bitcoin in 2026, the practical reality is that home mining is no longer competitive at any meaningful scale. The hash rate of the Bitcoin network has grown so dramatically that mining now requires specialized ASIC hardware (Application-Specific Integrated Circuits) running in industrial facilities with access to cheap electricity. The marginal cost of producing one Bitcoin includes hardware capital expenditure, electricity, cooling, facility maintenance, and increasingly the cost of energy procurement contracts.

A modern Bitcoin mining operation looks more like a power plant operator than a software business. The largest public miners (Marathon Digital, Riot Platforms, CleanSpark, Hut 8) operate hundreds of thousands of ASICs across multiple data centers, often co-located with stranded energy sources (flared natural gas, renewable curtailment, behind-the-meter generation). The economic question is straightforward: cost of electricity per kilowatt-hour plus hardware amortization versus Bitcoin's USD price times block reward. Margin compression is a permanent feature of the business — every halving cuts the block reward in half, and competition for hash rate squeezes profitability.

The pool dynamic is worth understanding. Individual miners (even with significant hardware) earn lumpy, infrequent block rewards. Mining pools aggregate hash rate from many participants and distribute rewards proportionally based on contributed work, smoothing the revenue. The largest pools (Foundry USA, AntPool, F2Pool, ViaBTC) control significant fractions of total network hash rate. The concentration question is a periodic concern but has not yet produced a successful attack.

For other Proof-of-Work chains (Litecoin, Dogecoin, Monero, Kaspa), the dynamics are similar but at smaller scale. For chains that have migrated to Proof-of-Stake (Ethereum since 2022), mining no longer exists — instead, validators stake the chain's native asset to participate in consensus and earn yield. The same economic functions (security, block production, reward distribution) exist, but the resource being expended is capital rather than electricity.

Most readers will not personally mine. The lesson is useful primarily for evaluating mining-related investments. Public mining stocks correlate strongly with Bitcoin's price but with operational leverage in both directions. Mining-related infrastructure businesses (energy procurement, ASIC distribution, data center construction) have their own cycles. Hash-rate-backed tokens and synthetic mining exposure products exist for those who want exposure without operating physical infrastructure.

The bigger structural picture: Bitcoin mining converts energy into security. The network's hash rate is the economic moat that makes the chain attack-resistant. This consumption of energy is the most-debated aspect of Bitcoin, and the debate is more nuanced than either side typically allows. Mining migrates to the cheapest available energy globally; the cheapest available energy is often stranded or otherwise unmonetizable; the carbon intensity of mining depends heavily on which energy sources are being used. This is worth understanding when forming any position on the environmental questions.

Read The Block's primer for the practical mechanics. The investment angle is worth thinking through separately.