Bitcoin Mining Guide 2026

Crypto mining is a popular way for investors to earn rewards, but it's complicated for beginners. We're looking at all you need to know about crypto mining. ⛏

What is Bitcoin mining?

Bitcoin mining, or crypto mining, is what makes the blockchains that host Bitcoin and some other cryptocurrencies work. It’s how new Bitcoins are created, and it’s how transactions on the network are processed and confirmed. Crypto mining is a critical part of the blockchain infrastructure as it maintains and develops the blockchain ledger.

There’s a lot of confusing terminology around Bitcoin mining - so let’s break down what you need to know.

Bitcoin mining terminology

• Public distributed ledger: This is the record of all transactions in a given blockchain network.

• Block: Blocks are individual units of the blockchain. Each block will have a record of the previous block, the confirmed transactions, and a nonce. 

• Block reward: This is the reward miners get for successfully mining a block.

• Hash: A hash is a function that transforms any data into a fixed size.

• Node: Any computer connected to the Bitcoin network is known as a node.

• Nonce: A nonce is a 32-bit field in a Bitcoin block - miners adjust the value of this to achieve a hash equal to or less than the current target hash value.

• Proof of work: This is the actual process of mining - computers solve a complicated mathematical puzzle known as proof of work

• SHA-256: This is a hash function that ensures all the various blocks are secure and cannot be altered.

Now let’s put it all together.

How is Bitcoin mined?

Bitcoin miners are validating and confirming new blocks for the Bitcoin network. To do this, they’re solving the puzzle known as proof of work. The computers, or nodes, are trying to generate a 64-digit hexadecimal hash that is equal to or less than a target hash in SHA-256. Once this has been done successfully, the new block is verified by a master node and added to the public distributed ledger. The miner is then given a block reward. Miners use both crypto mining hardware and mining software to manage the work.

Why does Bitcoin need mining?

Bitcoin mining maintains the integrity of the blockchain. As Bitcoin is decentralized, it relies on a network of users to both maintain a ledger of transactions and validate new transactions. Mining is the process by which this is done, as users come to a consensus over the accuracy of records and new transactions. 

How to mine Bitcoin

To mine Bitcoin, you'll need:

• A computer, and a good one at that. You'll need a PC with a powerful GPU as a minimum, but the reality is that to be competitive, you'll likely need a dedicated Bitcoin mining machine, also known as an ASIC miner (Application-Specific Integrated Circuit).

• Power supply: preferably low cost, Bitcoin mining uses up a lot of electricity!

• Mining software: There are lots of options around for Bitcoin mining software. The one you'll pick will depend on your experience, technical knowledge, and whether you're joining a mining pool. Common options include CGMiner, MultiMiner, BFGMiner, and Awesome Miner.

Can you still mine Bitcoin?

Yes. You can still mine Bitcoin, but you'll need top-of-the-line equipment for it to be profitable. There are around 900,000 Bitcoin left to mine, and the last Bitcoin is forecast to be mined in 2140.

Is Bitcoin mining environmentally friendly?

No. Bitcoin mining has been criticized for its energy usage. The electric consumption during the mining process is high. In fact, a study showed that in one year of mining, Bitcoin consumed 173.42 terawatt hours of electricity. This means Bitcoin mining uses more electricity per year than many countries. It would rank 27th among nations for electricity usage in a year, and the resulting carbon footprint is the equivalent of burning 84 billion pounds of coal! As the world moves towards more sustainable energies, Bitcoin will need to find a way to become more environmentally friendly.

Pros and cons of mining Bitcoin

What other cryptocurrencies can you mine?

Bitcoin isn’t the only cryptocurrency that can be mined. Any blockchain network using proof of work will need miners. Other cryptocurrencies to mine include:

• Dogecoin

• Litecoin

• Bitcoin Cash

• Bitcoin SV

Read next: Best Crypto to Mine

How to mine crypto

BCH, DOGE, LTC, and more all work in a similar way when it comes to mining. They all use the proof-of-work process, so you'll need similar equipment, including:

• A GPU or ASIC rig in most instances. This isn't always the case, as you can mine less-intensive coins like DOGE with less powerful PCs.

• Power supply: whatever you mine, you'll use up a lot of electricity. In some instances, like with lower value coins, it's definitely worth using a crypto mining calculator to ensure it's worth your while to mine if you have high electricity costs.

• Dedicated mining software: Each different coin uses a slightly different proof-of-work process, so each coin will have different software for mining. Like with Bitcoin mining software, there are a lot of options out there - so do your research to find the best suited to your experience and technical capabilities.

Another option is Bitcoin cloud mining. You can learn about how this works, and the pros and cons, in our guide to the best Bitcoin cloud mining platforms.

Crypto mining vs. liquidity mining

You might have heard the phrase liquidity mining thrown around, but this shouldn't be confused with crypto mining.

Liquidity mining is a means of making passive income from your crypto assets. It's where crypto investors add funds to various DeFi protocol liquidity pools to earn liquidity pool tokens. They're not minting new tokens or processing transactions; they're being rewarded for providing liquidity to a given DeFi protocol.

How much do crypto miners make?

For Bitcoin miners, anytime a miner successfully adds a new block to the blockchain, they’re rewarded with 3.125 Bitcoins. Rewards have been higher previously, but this has reduced with time due to Bitcoin halving.

However, it’s not easy to mine Bitcoin anymore. Proof-of-Work difficulty is increasing to compensate for increasing hardware speed. On top of this, the crypto mining space is more competitive than ever, with huge mining farms to contend with. 

The equipment to mine is more expensive, too, making it an inaccessible investment for many. While other crypto networks like Dogecoin offer more accessibility as the entry costs and computational power needed aren’t as high, miners make less, especially when you subtract running costs. Starts to sound a lot less appealing, doesn’t it?

This is why many miners have joined mining pools. A Bitcoin mining pool is a group of miners who combine all their computational power to increase the likelihood of them successfully mining a block before someone else. Bitcoin mining pools remain the most popular option, offering more accessibility and better rewards.

The amount you’re making in mining and indeed the way you go about your mining activities all matter, because the taxman wants to know about both. You can use a crypto tax calculator to help you figure out your taxable profits from crypto mining.

Is crypto mining taxed?

Yes. You may pay both Income Tax and Capital Gains Tax on your crypto mining rewards, depending on where you live and your transactions. Find out more in our guide to crypto mining taxes, or find out how Koinly deals with crypto mining transactions with our help guide on how to import mining income.