What is Crypto Mining? Find out Everything You Need

Some of our posts may have affiliate links including this one. That means if you make a purchase I may get a commission (at no extra cost for you). To find out more about it read our Disclosure page

If you are here trying to understand more about what crypto mining is and how it works, then you have come to the right place.

In this article, we will walk you through how crypto mining works, why people from all over the world are doing it, and how you could get started mining cryptocurrencies right from your home.

What is crypto mining - Bitcoin mined photo

What is Cryptocurrency Mining?

Cryptocurrency mining simply refers to the process by which someone is using computational power to mine for new coins, such as Bitcoin.

A miner is using computational power to solve mathematical puzzles and together with other miners, they create new blocks onto the previously existing ones. Thus continuing the ‘blockchain’. And as a reward for their work miners receive newly minted coins.

And this is the process of how mining Bitcoin and other Proof of Work coins work.

The miners’ role is to secure the blockchain and validate new transactions onto the blockchain. And they are a vital part of the process of mining cryptocurrencies.

The mining of crypto-currencies began in 2009 with the launch of Bitcoin.

In the beginning, Bitcoin wasn’t known by many so only a few people were actually mining it. That meant the competition was much lower. And the difficulty of mining Bitcoin was also very low.

Today it is very different.

mining crypto

This is how crypto mining works

To better understand what crypto mining is and how it works we will walk you through the technical steps and process of mining.

Technically, the entire mining process is basically a competition among miners to resolve complex mathematical and analytical problems with cryptographic hash functions which are linked to a block that contains the transaction data.   

Actually the puzzles aren’t so much of a puzzle but the miners need to mine new transactions via a mathematical function that takes new input and map it to a string of numbers. This function is known as a cryptographic hash.

This cryptographic hash is basically a long number which acts as the unique digital ID of the data entered on the blockchain.

There are two basic functions of mining crypto:

  1. Adding new transactions to the blockchain (safeguarding and authenticating)
  2. Creating new coins part of the process and to reward the miners with

Crypto mining broken down in steps

  1. People want to transact and send their Bitcoins
  2. A miner takes the information/hash from the previous transactions on the blockchain
  3. And now to add these new transactions on the blockchain the miners merge the previous hash with the new transactions and creates a new 64-bit hex number that is merged with other miner’s cryptographic hashes
  4. And now new blocks are added to the blockchain and the transactions have been confirmed

Over time as more blocks are created and more miners are joining in to help generate new blocks competition gets tougher and today’s difficulty to mine for example Bitcoin is extremely high.

Computer mining crypto

Why should you start mining?

Okay so now you might know what crypto mining is and how it works, but you also need to ask yourself why should I start mining crypto?

There are several reasons for you to consider participating in mining cryptocurrencies.

Besides, the amount of income accrued by miners in the mining process of cryptocurrencies, mining also provides a very important role in the development of a decentralised ecosystem.

Mining is essentially the only means to release new cryptocurrency into distribution.

For instance, the Bitcoin in circulation in February 2019 was about 17.5 billion, these high numbers in circulated are as a result of the activities of miners.

Besides the short-term income obtained from mining cryptocurrencies, a miner also possesses voting power. This simply means that a miner has the ability to influence the decision-making process of certain cryptocurrencies.

Mining Bitcoin

How to get started mining crypto

1 ) Get the necessary mining hardware

Back in 2009 and the next few years mining Bitcoin could be done with a computer. Today you need an ASIC miner to be able to successfully take part and mine new Bitcoins.

Without it, you won’t have a chance of mining Bitcoin. But there might be other cryptocurrencies with less competition where mining from your computer is possible.

2 ) Join a mining pool

Without joining a mining pool with other miners you need to do mine by yourself. And to mine Bitcoin for example, by yourself it would take about 69 years to mine a new block. You understand why that’s not a smart idea. So instead you need to join a mining pool for your crypto.

By joining a mining pool you set up your hardware to work together with other miners. And depending on the hash rate you provide to the pool the amount in rewards you get back is proportionate.

Less hash rate = lesser rewards / higher hash rate = higher rewards.

Also, the mining pool will take part in the rewards in fees, for operating the pool.

3 ) Download mining software

You need to download mining software to connect your ASIC miner to the blockchain and start mining crypto. This software will help to connect your device and point your work to the mining pool that you signed up for.

Mining software is free. And available for all OS and can run on any computer or even mobile phone.

computer software for mining

4 ) Create a crypto wallet

You need a crypto wallet to receive your rewards at. Without that the mining pool wouldn’t be able to send you the rewards based on the work you did.

We recommend that you invest in a safe hardware wallet, find out more about the most popular wallets in our review here.

5 ) Check the legal and tax process of mining crypto in your country

Before you invest in expensive hardware and start mining crypto it’s best that you look up what your government says about mining crypto. Is it legal?

Also if you mine crypto is that considered a job? Or a hobby? Maybe it depends on how much rewards you get back and the resell value of those cryptocurrencies?

We have written a guide on crypto taxes that explains a bit more about how taxes work for cryptocurrencies.

6 ) Sign up a cryptocurrency exchange

If you want to ‘cash in’ your crypto rewards then you need to sign up at a cryptocurrency exchange. You should then send your cryptocurrencies from the wallet that you previously created. And then send them to the cryptocurrency exchange.

We have reviewed the most trustworthy crypto exchanges here. We also recommend using a cryptocurrency exchange that has a Fiat currency gateway. Meaning you can sell your cryptocurrencies for USD, GBP, EUR, etc directly. And then withdraw them to your bank account.

Fiat gateway exchanges are: Coinbase, Binance, KuCoin for example

Binance - Exchange to buy Bitcoin

This is what you need to start mining crypto

For anyone who intends to start mining Cryptocurrencies, you will need:

  • Specific mining hardware. Either a mining rig or an ‘ASIC miner‘ (application-specific integrated circuit (ASIC) or a computer with an advanced graphics processing unit (GPU)
  • You will also be requiring a means of cooling the hardware as you be working for long hours
  • Reliable internet connection
  • An authentic cryptocurrency mining software package.
  • Also, you will need to be a member in an online cryptocurrency exchange platform
  • As well as a group of other mining peers.

Find out more about ASIC miners profitability here

ASIC Miner

However, you should be aware of the costs associated with mining, for example:

  1. Setting up the necessary hardware. Competition for mining Bitcoin and other cryptos is fierce today. Which makes it even harder to mine. Competition is investing in the best equipment to beat the rest
  2. The cost of electricity can be very high. Depending on where you live, and your current electricity charges mining crypto and Bitcoin might cost more than what you get back due to high electricity charges

Most of the competition uses specialised mining rigs for mining crypto. These devices cost anything from $500 to $10,000. Creating serious questions about the profitability of mining crypto. But also we can question how decentralised is it if only the rich can afford it?

competition crypto mining

Competition for mining crypto is fierce

Ambitious crypto miners should also understand that with the increase in value and popularity of cryptocurrencies, there is also a subsequent increase in the competition among miners.

This competition recently involves organizations and enterprises with a wide range of resources other than what individuals require to compete.

Today mining cryptocurrencies like Bitcoin is more a full-time job and a business than just a hobby done by normal people at their homes.

With the advanced knowledge of the importance of hash rates, miners proceeded from single GPUs to connecting several GPUs and developed what is called a mini-farm. A mini-farm is a large number of GPU accelerators that drives the hash rates.

Due to high power consumption by mini-farms, miners developed the Field-programme gate array (FPGAs) which offered substantial improvements, especially in the power consumption. Thus providing FPGA miners an edge over miners using the system units of a standard computer.

crypto mining farms in China
Crypto mining farms in China

With more miners, there is a subsequent increase in the difficulty of the crypto calculations, where the variable is hash rates – the speed at which the puzzles of crypto are calculated, and this returns income to the miner.

Hence, the profit accumulated by a miner is dependent on the degree of hash power owned by the miner relative to the network.

Invariably, this implies that it is a continuous sequence of advancing technology and this motivates miners in solving more complex calculations necessary for mining.

As a miner, the most secure approach to the mining of cryptocurrencies is by first gathering the required hardware and then building a personal cryptocurrency hashing system.

wind turbines

Mining Bitcoin and crypto is a hot topic

There has been a drastic rise in the last few years in cryptocurrency mining both as a subject of discussion in the tech world and as an activity.

The most common concerns around mining Bitcoin and cryptocurrencies have been around:

  1. The energy usage for mining Bitcoin and cryptocurrencies is extremely high. There is so much electricity going to mine crypto around the world that it is higher than in some countries total energy consumption yearly
  2. Is it still really decentralised? Or is more of a business with just a few mining pools that basically control Bitcoin and the same for Etherum and other cryptocurrencies. Up to 3-4 mining pools, and potentially organisations that actually run and control both Bitcoin and Ethereum is a major flaw and concern
cryptocurrency wallet

Other options besides mining crypto – ‘Staking crypto’

Proof of Stake or (PoS), is another type of blockchain model. And instead of mining new transactions with a lot of computational power and hash rate going into it, you can stake your cryptos instead. This process is far less energy consuming and much easier for people to join in with.

The role of stakers is similar to miners, they safeguard a blockchain network and authorize new transactions on it.

The Point of Stake is used by owners of cryptocurrencies that are active on a blockchain to stake their coins. These staked coins are thereby used to authenticate transactions and also be develop additional blocks. The coins are usually put in a wallet by operators that stake their coins.

This wallet is always linked to the blockchain and requires to be connected to the blockchain always. Although there are innovations in the staking model where we have seen cold staking been introduced which makes it even easier to stake crypto without a wallet being connected to the internet 24/7.

The benefits associated with staking crypto includes:

  • Less electricity consumption
  • There is reduced stress
  • An extra computer or other hardware costs is not required
  • The demand for advanced technical skills is reduced

Find out more about how staking works here, and our guide to 10 of the best staking coins.


I hope that by now you have a good understanding of what crypto mining is, how it works and the process of getting started. It might be a bit competitive to start mining Bitcoin today but know that there are more crypto-options if you want to get started mining.

Otherwise staking cryptocurrencies is something similar to mining but much easier to get started and to get rewards. Find out more about what staking cryptocurrencies are here.

If you are looking for smart ways of generating more income for yourself then mining could be something for you. But it is important to realise that the competition is high for mining crypto and Bitcoin.

There are other ways to generate income from crypto that we have written about, read our guide on both passive incomes from crypto and our list of the 15 best ways to get income from crypto.

Learn more about how mining specifically work for Bitcoin Cash and how to gets started mining BCH here

Other popular guides:

  1. What is a Cryptocurrency?
  2. Guide to Cryptocurrency Markets
  3. The best Bitcoin and cryptocurrency wallets
  4. Guide to Crypto Trading Bots & 6 the best platforms

Subscribe to our list

Don't worry, we don't spam

We will be happy to hear your thoughts

      Leave a reply

      Go Cryptowise
      Enable registration in settings - general