BITCOIN · MINING
How Bitcoin mining actually works: machines, blocks, pools and cash flow
Mining is an operating activity that competes for Bitcoin rewards. A dashboard balance tells only a small part of the story.
By Ties Jezuit · Reviewed 14 October 2026 · General orientation
What the machines do
Mining hardware repeatedly hashes candidate block headers, looking for a result that satisfies the network’s proof-of-work target. Other nodes independently check a proposed block against consensus rules. The successful block can contain a coinbase transaction paying the permitted subsidy and transaction fees. The network does not pay for electricity consumed or guarantee revenue to a particular machine. More hash rate changes the competition, not the number of rewards you are contractually owed.
Why pools matter
A small operator can face extremely uneven results when mining alone. A pool combines contributed work and uses a payout method to distribute income. Shares measure work submitted to the pool; they are not individually successful Bitcoin blocks. Read the payout method, fees, settlement currency and who controls the payout address. Pool payments may come from the pool’s ordinary wallet rather than a direct share of the original coinbase output.
Revenue is not profit
Start with expected Bitcoin receipts, then deduct electricity, hosting, repairs, pool fees, downtime, insurance and applicable taxes. Include the price paid for the ASIC, shipping, installation and eventual resale value. Difficulty, fees and Bitcoin price can move in different directions. A profitable month does not establish that the machine will repay its cost over a realistic life. Separate a Bitcoin-denominated result from a dollar-denominated return.
What I would require before funding it
Identify the machine by serial number, legal owner and location. Obtain the power agreement, access and removal rights, meter basis, repair process and actual historical uptime for that site. Test the model with lower Bitcoin prices, rising difficulty and prolonged outages. An illustrative 3.5 kW machine running continuously uses about 84 kWh per day before other site loads; at an assumed $0.06 per kWh that alone is $5.04 daily. Those assumptions are arithmetic, not a certified machine specification or available tariff.
Sources and further checks
- Bitcoin developer guide: mining
- Bitcoin developer guide: block chain and coinbase maturity
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