2.13 Mining as a Business

Bitcoin mining is a real-world business that turns electricity into new coins and transaction fees. Think of it like running a delivery fleet, but instead of trucks you operate specialised computers, and instead of gasoline you buy electricity.

Revenue side: each block a miner finds pays them the 'block subsidy' (newly created BTC, currently 3.125 per block) plus the fees from every transaction included. Both are paid in Bitcoin.

Cost side: the specialised mining computers (called ASICs) and the electricity to run them. Both are paid in regular money. So miners are constantly converting fiat costs into Bitcoin revenue.

The whole industry is a race to find the cheapest electricity and the most efficient hardware. The miners with the worst margins are the first to shut off when prices drop.

There's a built-in balancing mechanism: when Bitcoin's price rises, mining becomes very profitable, more miners plug in, and the network automatically raises difficulty to keep blocks coming every 10 minutes. When the price falls, the opposite happens. The system self-regulates.