Quick take
- Mining secures proof-of-work networks such as Bitcoin; miners earn new coins and fees.
- Bitcoin mining is dominated by specialised ASIC miners and cheap electricity.
- Ethereum stopped mining in 2022; crypto cloud mining offers are a frequent scam.
What cryptocurrency mining does
On proof-of-work blockchains, miners compete to add the next block of transactions by repeatedly hashing data until they find a valid result. The winner earns the block reward plus transaction fees. The work makes rewriting history expensive, which is what keeps the network secure. Bitcoin's reward halves roughly every four years; see our halving guide.
ASIC miners and mining rigs
Bitcoin mining today is done with ASIC miners, machines built for one hashing algorithm. A crypto mining rig of graphics cards can still mine some smaller proof-of-work coins, but earnings are small and volatile. Since September 2022, Ethereum uses proof of stake, so ether can no longer be mined.
The maths every miner runs
| Input | Why it matters |
|---|---|
| Hash rate of your machine | Your share of the network's total work |
| Network difficulty | Rises as more miners join, cutting everyone's share |
| Electricity price and efficiency | Usually the biggest ongoing cost |
| Coin price | Can fall faster than you can recover the hardware cost |
| Hardware price and lifespan | Newer machines make older ones unprofitable |
Industrial miners with cheap power and the latest machines earn most of the rewards. At household electricity prices, home mining is often unprofitable.
Crypto cloud mining and mining apps
Crypto cloud mining sells you a share of someone else's hardware. Some services are real businesses; many have been Ponzi schemes that paid early users with later users' deposits. "Free crypto mining" apps usually pay tiny amounts, show adverts, or never allow withdrawals. Warning signs:
- Fixed daily returns regardless of coin price or difficulty.
- Bonuses for recruiting friends.
- Withdrawals that require an extra "activation" payment.
See how to spot trading scams.
Common questions
Is crypto mining profitable?
For large operations with cheap electricity and efficient hardware, it can be. For most households, electricity and equipment costs outweigh rewards.
Can I mine Ethereum?
No. Ethereum moved to proof of stake in September 2022 and no longer uses mining.
Is cloud mining legit?
Some providers are genuine, but cloud mining has a long history of fraud. Treat promised fixed returns as a red flag.
Sources
- Bitcoin: A Peer-to-Peer Electronic Cash System (2008)
- Ethereum.org, The Merge