What Is Crypto Mining? A Simple Breakdown of How It Works Today

Bitcoin didn’t become worth thousands of dollars because people just bought it. It became valuable because thousands of computers around the world were working nonstop to secure its network - that’s crypto mining. If you’ve ever wondered how new coins appear out of nowhere or why your graphics card is running hot, this is where it all starts.

How Crypto Mining Actually Works

Crypto mining is the process of verifying transactions on a blockchain and adding them to a public ledger. Think of it like keeping a shared notebook that everyone can see but no one can erase. When someone sends Bitcoin or Ethereum, that transaction needs to be confirmed. Miners collect these transactions, bundle them into a block, and solve a complex math puzzle to prove they did the work. The first one to solve it gets to add the block to the chain - and earns a reward.

This puzzle isn’t something you can guess. It’s a cryptographic hash function that requires massive computing power. The system is designed so that solving it takes about 10 minutes for Bitcoin. That delay keeps the network stable and prevents fraud. The math is hard on purpose - it makes cheating too expensive.

The reward? For Bitcoin, it’s currently 3.125 BTC per block (as of 2025), worth roughly $200,000 at today’s prices. But that reward halves every four years. The next halving is due in 2028. That’s why early miners got 50 BTC per block - and why mining today is nothing like it was in 2010.

What Hardware Do You Need?

Back in 2009, you could mine Bitcoin with a regular laptop. Today? Forget it. You need specialized machines called ASICs - Application-Specific Integrated Circuits. These are chips built for one thing: solving Bitcoin’s hash puzzles as fast as possible. A good ASIC miner like the Antminer S21 can do 200 terahashes per second. That’s 200 trillion guesses per second.

For other coins like Ethereum, which switched to proof-of-stake in 2022, mining isn’t possible anymore. But coins like Litecoin, Dogecoin, and Ravencoin still use proof-of-work. For those, you can still use high-end GPUs - the same graphics cards used for gaming. A single RTX 4090 can earn about $4-$6 per day mining Ravencoin, depending on electricity costs and coin prices.

But here’s the catch: electricity is your biggest expense. In the UK, where the average rate is 24p per kWh, running a high-end ASIC 24/7 can cost over £150 a month. If your miner uses 3,200 watts and your electricity is 30p/kWh, you’re spending more than you earn unless the coin price jumps.

Proof of Work vs. Proof of Stake

Not all cryptocurrencies use mining. Ethereum, Cardano, and Solana moved to proof-of-stake. Instead of computers solving puzzles, validators are chosen based on how much crypto they “stake” - or lock up - as collateral. It’s like betting your own money to help run the network. If you behave honestly, you get paid. If you cheat, you lose your stake.

This shift cut Ethereum’s energy use by over 99%. That’s why most new projects avoid mining. It’s not just about efficiency - it’s about regulation. The EU and UK are pushing for greener crypto. Mining farms are being shut down in places like Sweden and Kazakhstan over power grid strain.

So while Bitcoin still relies on mining, the rest of the crypto world is moving away from it. That makes Bitcoin mining more of a niche industrial activity than a hobby. You’re not just competing with other hobbyists - you’re competing with big mining companies in Texas, Kazakhstan, and Canada that run entire warehouses full of ASICs.

Can You Still Mine Crypto Profitably?

For most people? No. Not unless you have access to cheap power.

Let’s say you buy an Antminer S21 for £4,500. It uses 3,250 watts. At 24p/kWh, you’ll spend about £190 a month on electricity. If Bitcoin is at $65,000, you might earn £150-£180 a month in rewards after fees. That’s a loss. Even if Bitcoin hits $100,000, you’re barely breaking even after hardware depreciation and cooling costs.

There are exceptions. If you live in a place with free or subsidized electricity - like parts of Iran or Venezuela - mining can still work. Or if you have solar panels and excess power. Some UK farmers have started mining using biogas from their livestock. Others use idle wind turbines at night when the grid doesn’t need power.

But for the average person in Manchester? Mining is a money-losing experiment. You’re better off buying Bitcoin directly and holding it.

What About Mining Pools?

Since solo mining is nearly impossible now, most miners join pools. A mining pool is a group of miners who combine their computing power. When the pool finds a block, the reward is split based on how much work each member contributed.

Instead of waiting years to find a block on your own, you get small payouts daily. It’s like buying a lottery ticket every day instead of waiting to win the jackpot. Popular pools include Slush Pool, F2Pool, and Antpool.

But pools take a fee - usually 1-3%. And if the pool gets too big, it risks centralizing control over the network. That’s why some miners avoid the biggest pools, even if it means slower payouts.

Is Crypto Mining Legal?

In the UK, yes - it’s completely legal. But it’s not without risks.

The government doesn’t ban mining, but it does watch energy usage. The National Grid has warned that large-scale mining could destabilize local power supplies. Some councils in Greater Manchester have started requiring permits for mining operations over 5 kW. If you’re running a full rack of ASICs in your garage, you could get flagged.

Also, HMRC treats mining rewards as taxable income. If you mine Bitcoin and sell it later, you owe Capital Gains Tax on the profit. If you’re mining as a business, you might need to register for VAT. Keep detailed records. Many miners have been hit with surprise tax bills because they didn’t track their coin values at the time they were earned.

Why Does It Matter If You Don’t Mine?

You don’t need to mine to benefit from crypto. But understanding mining helps you understand why Bitcoin is secure. The more miners there are, the harder it is to hack the network. That’s why Bitcoin’s value is tied to its hash rate - the total computing power securing it.

When hash rate drops - like after China banned mining in 2021 - prices often dip. When it rises again, confidence returns. Mining isn’t just about creating new coins. It’s the backbone of trust in the system.

Even if you’re just holding Bitcoin, you’re relying on miners to keep the network running. If miners stop because it’s no longer profitable, transactions slow down. Fees go up. The whole system becomes less reliable.

That’s why the future of mining matters - even if you never touch a GPU or ASIC.