What Is Bitcoin Mining and How Does it Work?
If you've ever wondered where Bitcoin comes from or how it's created, you're not alone. Beneath the surface of every transaction lies a complex, competitive, and fascinating process called Bitcoin mining—a concept that's often misunderstood yet fundamental to how the entire network works.
From decentralised security to global energy debates and even matters of national security, mining is about much more than earning rewards. It's the beating heart of Bitcoin—verifying transactions, securing the blockchain, maintaining the network, and helping shape the future of digital finance.
In this article, I'll explain what Bitcoin mining is, why it matters, how it has evolved over time, and the broader implications it has for energy, the environment, and national sovereignty.
What Is Bitcoin Mining?
Bitcoin mining is the process through which new BTC is created and transactions on the Bitcoin network are verified and added to the blockchain. Think of miners as digital accountants who use powerful computers to solve complex mathematical puzzles. When a puzzle is solved, the miner gets the right to add a new block of transactions to the blockchain and is rewarded with newly minted BTC plus transaction fees.
This process happens approximately every 10 minutes and is entirely decentralised—no single authority controls it. Instead, thousands of miners around the world compete simultaneously, making the system both robust and resistant to fraud or manipulation.
Why Is Bitcoin Mining Important?
Mining is more than just creating new Bitcoin—it's the backbone of Bitcoin's security and integrity. Every time a miner successfully adds a block to the chain, it locks in the transaction history in a way that can't be easily tampered with, ensuring immutability and resilience without relying on a central authority.
Miners also play a key role in keeping the Bitcoin network alive and well. They validate and confirm transactions, preventing issues like double-spending and network congestion. Without miners, Bitcoin wouldn't just stop producing new coins—it would cease to function altogether.
The Historical Evolution of Bitcoin Mining
When Bitcoin first launched in January 2009, anyone with a basic computer could mine using just a regular CPU. In fact, BTC's mysterious creator, Satoshi Nakamoto, most likely mined the first blocks on a regular PC or laptop. But as interest in Bitcoin grew, so did the competition—and miners quickly moved on to more powerful graphics processing units (GPUs) to stay ahead.
Soon after, we saw the rise of field-programmable gate arrays (FPGAs), followed by the introduction of ASICs (Application-Specific Integrated Circuits), which are still dominating the mining space. These machines are purpose-built for one job: mining Bitcoin, and they do it incredibly efficiently. Today, industrial-scale mining operations use racks of ASICs running 24/7 in data centres across the globe, with the BTC hashrate—the total computing power in the network—standing at over 921 EH/s (as of March 25, 2025) near the 993 EH/s all-time high recorded on February 2, 2025.
Over the years, mining has evolved from a hobbyist pursuit into a high-stakes, cutting-edge industry. Along the way, innovations in energy efficiency, hardware, cooling systems, and firmware have shaped the industry—making modern mining far more sophisticated and competitive than in Bitcoin's early days.
Bitcoin Mining and Energy Consumption
Bitcoin mining is undeniably energy-intensive, but context matters. According to the Cambridge Bitcoin Electricity Consumption Index (CBECI), the BTC network uses around 177.7 terawatt-hours (TWh) per year—more than Egypt (168.3 TWh) and not far behind South Africa (191.4 TWh). Unsurprisingly, this has sparked intense debates, particularly following Tesla's May 2021 decision to suspend BTC payments due to environmental concerns.
However, this narrative doesn't tell the full story. While Bitcoin's energy use is indeed high, it's crucial to consider how that energy is sourced. A growing body of evidence suggests that the network is becoming greener over time. In fact, a 2023 report found that over 54.5% of Bitcoin mining now relies on sustainable energy, including hydro, wind, solar, and even geothermal power.
Interestingly, Bitcoin mining can also turn environmental liabilities into opportunities. Take gas flaring—a common practice in the oil industry where excess methane is burned off, significantly contributing to global CO2 emissions. Instead of flaring, that methane can be redirected to power Bitcoin mining rigs, significantly reducing environmental impact while monetising wasted energy.
South Africa, in particular, has a unique opportunity to lead in this space. In a VALR Podcast episode, tech entrepreneur and Bitcoin advocate Stafford Masie highlighted Bitcoin mining's potential to stabilise the national power grid. By consuming surplus electricity during off-peak periods and instantly powering down during demand spikes, Bitcoin mining can act as a "flexible buyer of last resort"—a concept that could help alleviate pressure on Eskom and even generate revenue.
"If Eskom had started Bitcoin mining in 2020, it could have cleared its debt and generated a R400 million surplus by now," Stafford noted. With over 50% of Bitcoin mining already powered by renewables and South Africa's untapped energy potential, Stafford believes the country could become a global Bitcoin mining hub—attracting foreign investment, reducing energy waste, and leading by example in the shift toward greener mining.
BTC Mining as a National Security Issue
Bitcoin mining is more than just an economic or environmental conversation—it's fast becoming a national security matter, according to VALR CMO Ben Caselin. In an op-ed published on CoinDesk, Ben explains that holding BTC doesn't grant control over the Bitcoin network. Instead, real influence comes through mining, where hash power secures the network and verifies global transactions.
Much like control over oil pipelines, internet infrastructure, or payment systems like SWIFT, having a stake in Bitcoin's global hash power means having a say in the governance and direction of the network. Without it, countries may find themselves dependent on rival nations or corporations for access to the most secure and decentralised settlement layer on the planet.
Ben argues that fostering domestic mining industries is a strategic imperative. If a hostile actor were to gain a dominant share of the network's hash rate, they could theoretically censor transactions or degrade trust in the network. Conversely, if democratic nations and their allies support local mining operations, they help decentralise power and maintain Bitcoin's integrity as a neutral, censorship-resistant system.
From a geopolitical perspective, the concentration of mining power in a single country or political bloc can have serious consequences. For instance, when China banned crypto mining in 2021, the US rapidly became the largest hub for Bitcoin mining—a shift that rebalanced power across the network. If nations like South Africa want to maintain relevance in the digital economy, participating in the global hash rate is no longer optional—it's a strategic necessity.
Bitcoin offers more than just a store of value similar to gold—it's a decentralised global settlement network. By supporting mining within their borders, nations don't just gain potential economic benefits—they secure their stake in a growing system of financial sovereignty. As Ben puts it, "No hash power, no say."
Bitcoin Mining Isn't Going Away
Bitcoin mining has come a long way—from humble laptop beginnings to the powerhouse data centres that secure the network today. It's not just about minting new coins; it's about maintaining decentralisation, enabling trustless transactions, and contributing to a broader movement toward financial and technological sovereignty.
But one thing is clear: Bitcoin mining isn't going away. It's evolving—and with it comes new challenges, opportunities, and responsibilities for individuals, businesses, and entire nations.
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Frequently Asked Questions
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Mining one full BTC depends on your share of the total network hash rate. A new block (3.125 BTC reward, as of April 2024) is mined roughly every 10 minutes. But unless you're running a large-scale ASIC setup, solo mining a full coin could take months or even years. Industrial rigs may reduce that to days, but only with extreme capital investment.
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Bitcoin mining is legal in South Africa, though it sits in a regulatory gray zone. The Reserve Bank hasn't banned mining, and it’s considered legal under current frameworks. Mining income must be declared and is taxable by SARS.
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Bitcoin mining is the process of using computers to solve complex mathematical puzzles, verifying transactions, and adding them to the blockchain. Miners are rewarded with new BTC and transaction fees for successfully adding a block to the blockchain approximately every 10 minutes.
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You need specialized hardware (like ASICs), electricity, and infrastructure—none of which are free.
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Bitcoin mining can be both good and bad. It plays a crucial role in verifying transactions and decentralizing power, but it consumes a lot of energy. Increasing use of sustainable energy and innovative approaches like using gas flaring are helping to reduce environmental impact.
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Yes. Miners are paid with newly minted Bitcoin and transaction fees when they successfully add a block to the blockchain.
Risk Disclosure
Trading or investing in crypto assets is risky and may result in the loss of capital as the value may fluctuate. VALR (Pty) Ltd is a licensed financial services provider (FSP #53308).
Disclaimer: Views expressed in this article are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.
