Mastering Bitcoin Mining from Scratch: How It Works, Actual Costs, and Opportunities in 2025

What Exactly Is Crypto Mining? An In-Depth Analysis of Its Core Mechanisms

Many people are curious about Bitcoin mining but have limited understanding of its essence. Simply put, Bitcoin mining is a process of computational power competition where miners solve complex mathematical problems to verify transactions and maintain network security, thereby earning Bitcoin rewards.

In the Bitcoin network, every transaction needs to be recorded and verified. This work is carried out by miners distributed worldwide. Miners refer to participants who own mining hardware and contribute computational power to the Bitcoin network. Mining hardware is the collective term for these computing devices, evolving from initial ordinary CPU computers to now specialized ASIC chips.

Whenever miners successfully verify a batch of transactions (packaged into a “block”), they receive a system reward. This forms a cyclical incentive mechanism—without rewards, no one would want to expend electricity to maintain the network; without miners, Bitcoin would grind to a halt.

Proof-of-Work Mechanism: Why Is It So Complex?

Bitcoin’s security is built on a mechanism called “Proof-of-Work” (PoW). Although it appears complex, the logic is relatively straightforward:

The system issues a challenge to all miners—to find a specific value (hash) that meets certain criteria. This process requires extensive trial and error. Miners’ computers attempt billions of calculations per second until the correct answer is found. The first miner to find the solution broadcasts the new block to the entire network. Other nodes verify the validity of the answer; once most nodes accept it, the new block is added to the blockchain.

This design has a clever aspect—if someone tries to cheat by altering transaction history, they must re-calculate all subsequent blocks, which requires an astronomical amount of work. Therefore, PoW provides robust security guarantees.

Currently, the total network hashrate exceeds 580 EH/s (exahashes per second). What does this mean? Mining with a single household computer is virtually impossible to succeed.

Dual Revenue Streams in Mining

Many think miners only earn from block rewards. In reality, miners’ income comprises two parts:

Block Reward: Every time a miner successfully verifies a block, the system automatically generates a certain amount of new Bitcoin as a reward. This is the sole source of new coins. By design, this reward halves every four years. After the most recent halving in April 2024, the block reward decreased from 6.25 BTC to 3.125 BTC.

Transaction Fees: Each Bitcoin transfer requires a fee. As network congestion increases, fees rise accordingly. During active periods (e.g., the 2023 inscription boom), transaction fees can account for over 50% of miners’ total income.

In theory, as long as mining profits exceed costs, there will be participants. This ensures the continuous operation of the Bitcoin network.

From Personal Computers to Enterprise Mining Farms: 15 Years of Industry Evolution

2009-2012: CPU Mining Era

When Bitcoin was born, difficulty was extremely low. Anyone could mine Bitcoin easily with a home computer. Satoshi mined the first block using a regular laptop, which is hard to imagine today.

2013-2015: Intense Competition Between GPUs and ASICs

As participation increased, network difficulty skyrocketed. GPUs (graphics cards), with their parallel computing ability, began to replace CPUs. Soon after, mining-optimized ASIC chips emerged, completely changing the game. ASIC miners are far more efficient than GPUs but also significantly more expensive.

2015 to Present: Industry-Level Centralization

ASIC miners have become mainstream. Devices like Antminer S series and WhatsMiner M series dominate the market. Meanwhile, individual miners’ success rates plummet, leading to the rise of mining pools.

Mining pools operate by combining the computational power of many miners to participate in mining collectively. When the pool finds a valid block, rewards are distributed proportionally based on each miner’s contribution. This greatly reduces the income volatility for individual miners.

The Current State of Mining: Is There Still a Chance for Individuals?

If you’re considering mining with a home computer today, honestly—it’s almost impossible. The reasons are straightforward:

• The total network hashrate has reached 580 EH/s
• Your single computer might only have a few GH/s of hashrate
• The probability of successfully finding a block is akin to a grain of sand in the universe

However, this does not mean individuals cannot participate at all. Mainstream options include:

Buying Professional Mining Hardware + Joining a Pool: Purchasing ASIC miners (costing $1,000–$2,000 or more) and joining a mining pool. Theoretically, you can earn proportionally, but electricity and maintenance costs may offset profits.

Renting Hashrate: Some platforms offer hashrate leasing services, allowing users to rent remote mining capacity. This avoids hardware purchase costs but involves complex fee structures; careful comparison is necessary.

Mining Funds: Certain financial products enable indirect investment in mining operations without managing hardware yourself.

The key point is: No matter which route you choose, making money solely from mining is no longer a “free lunch.”

The Legality of Bitcoin Mining in 2025: The Situation in Taiwan

Regarding “Is mining legal in Taiwan?”, this is a concern for many interested Taiwanese users.

Based on current information, Taiwan does not explicitly prohibit mining itself, but there are practical obstacles:

Electricity Costs: Taiwan’s electricity prices are relatively high (about 1.5–2 times the global average). High electricity costs directly compress mining profits. In international competition, regions with lower costs (e.g., Iceland, Iran, Kansas) have clear advantages.

Environmental and Energy Policies: As global attention to carbon emissions increases, Taiwan’s government has strengthened regulations on energy-intensive industries. Large-scale mining facilities may need environmental assessments and face additional restrictions.

Tax and Regulatory Gaps: Tax treatment of cryptocurrency mining remains ambiguous in Taiwan. How mining income should be declared and taxed requires consultation with tax authorities.

Practical Advice: Interested miners in Taiwan should first confirm the legal status with local government or professional advisors to avoid disputes later.

The True Cost of Mining

Mining is not just “buy hardware + turn on power.” The full cost structure includes:

Hardware Investment: ASIC miners cost between $1,000–$3,000. As technology advances, older models depreciate quickly. Buying the latest models offers better performance but involves higher initial investment.

Electricity Expenses: Modern miners consume 1,500–3,000 watts. At $0.10 per kWh, monthly electricity costs can reach $500–$1,000, translating to annual costs of $6,000–$12,000.

Cooling and Infrastructure: Large-scale mining requires air conditioning, ventilation, stable power supplies, etc. Small individual miners might overlook this but cannot fully avoid heat dissipation issues.

Maintenance and Upgrades: Hardware failures, network upgrades, regular maintenance incur costs.

Hosting Fees (if using third-party facilities): Hosting in data centers typically costs 5–25% of monthly electricity expenses.

In aggregate, industry data suggests that by early 2025, the average cost to mine a single Bitcoin is approximately $40,000–$50,000 (depending on electricity prices and hardware). When Bitcoin’s market price falls below this, marginal miners tend to shut down.

Earnings Calculation: How Much Can You Make?

This depends on several variables:

Hardware Hashrate: A high-end ASIC miner might have around 150–180 TH/s. In contrast, a home computer might only have 0.0001 TH/s—millions of times less.

Network Difficulty: Higher difficulty means fewer Bitcoins mined per fixed hashrate. Difficulty adjusts approximately every two weeks based on total network hashrate.

Bitcoin Price: Directly affects USD-denominated earnings. Price volatility makes profit calculations complex.

Electricity Costs: Determine actual profit. The same mining income can be profitable in low-cost regions and unprofitable elsewhere.

Professional tools are typically used for precise calculations. Under ideal conditions (cheap electricity + high spot prices), high-end miners can earn $500–$2,000 per month. But this optimistic scenario is often not the case—high electricity costs and low Bitcoin prices can lead to losses.

The Far-Reaching Impact of the 2024 Halving

In April 2024, Bitcoin completed its fourth halving. The block reward dropped from 6.25 BTC to 3.125 BTC—cutting new coin issuance by 50%.

Impact on Miners:

The revenue plunge forces less efficient miners out. High electricity costs and outdated hardware are hit hardest. The total network hashrate experienced a short-term decline (about 5–10%), but was quickly recovered by more efficient machines. This process is called the “miner capitulation wave.”

Transaction Fees Become More Important: As block rewards halve, miners’ income structure shifts. Transaction fees gain prominence, prompting miners to focus on network activity. Applications like Ordinals and Layer 2 solutions boost on-chain activity, indirectly supplementing income.

Increased Industry Centralization: Post-halving, only the most cost-efficient large pools can sustain profitability. Small independent miners struggle to survive, leading to further concentration of hashrate among a few large entities.

Miners’ Strategies in Response

To cope with halving challenges, experienced miners adopt various strategies:

Phasing Out Old Hardware: Outdated miners with poor efficiency and high power consumption are replaced with the latest models like S19 Pro, M30S++, etc. This upgrade involves significant costs but reduces electricity expenses.

Cost Optimization and Diversification:

• Seek the cheapest electricity sources—geothermal in Iceland, hydroelectric in Paraguay, wind power in Mongolia.
• Some pools support multi-coin automatic switching (e.g., mining Bitcoin and other PoW coins simultaneously) to maximize returns.

Hedging with Derivatives: Mature miners often sell futures contracts to lock in expected yields and hedge against price drops.

Exploring Hybrid Models: Some innovative farms utilize “waste energy mining”—using industrial waste heat, biogas, etc., to drastically lower marginal electricity costs.

The Future of the Mining Industry

Centralization Is Inevitable:

Small miners are likely to exit the scene. Future Bitcoin mining will be dominated by a few large pools—Foundry USA, Antpool, F2Pool, etc.—which control the majority of global hashrate. These giants leverage economies of scale, bargaining power, and technological advantages.

Emerging Applications Create New Opportunities:

Although block rewards continue to diminish (halving every four years, approaching zero eventually), transaction fees have enormous potential. As Bitcoin’s use cases expand—from simple transfers to complex smart contracts, NFTs, cross-chain bridges—more transactions mean higher fees, which can supplement miners’ income.

Sustainable Mining Becomes a Selling Point:

Environmental concerns are pushing the industry toward innovation. Using renewable energy, optimizing efficiency, and transparent energy consumption disclosures are becoming competitive advantages for new mining farms.

Mining vs. Trading: Which Path to Choose?

Many are torn between mining and direct trading. Both have pros and cons:

Advantages of Mining:

• Participating in the core operation of the Bitcoin network, fostering a sense of “consensus”
• Long-term stable cost structure (mainly electricity)
• Can be viewed as a “production method” rather than pure speculation

Disadvantages of Mining:

• High initial hardware investment
• High professional requirements (hardware selection, tuning, maintenance)
• Complex cost structure, difficult to quickly adjust
• Affected by network difficulty fluctuations, making profits unpredictable

Advantages of Trading:

• No hardware purchase needed
• Flexible entry and exit, quick market response
• Lower barrier (just open an exchange account)
• Returns depend entirely on trading skills

Disadvantages of Trading:

• High volatility risk
• Prone to emotional decision-making
• Requires continuous market research

Conclusions and Practical Advice

Bitcoin mining has evolved from fringe activity to a professional industry, reflecting the maturity of the entire crypto market. If you’re still thinking “free Bitcoin mining,” unfortunately, that era is over.

Recommendations for potential participants:

Clarify Your Role: Are you aiming to contribute to network security? Or seeking investment returns? The former may not be profitable but offers a sense of participation; the latter requires careful ROI calculations.

Thoroughly Assess Costs: Before buying hardware, precisely calculate total investment, monthly electricity, maintenance, and expected mining income. If the payback period exceeds two years, proceed with caution.

Stay Informed on Policies: Especially for Taiwanese users, actively monitor local tax, environmental, and energy policies to avoid compliance issues.

Consider Hosting and Partnerships: Operating hardware yourself is often inefficient. Collaborating with reputable pools or hosting providers can reduce risks and stabilize income.

Diversify Strategies: Don’t see mining and trading as mutually exclusive. Small-scale mining combined with trading can help accumulate practical experience.

Bitcoin mining still offers opportunities, but only if you do thorough research, maintain rational expectations, and manage risks effectively.