All Research
Report
April 29, 2022
Greg Cipolaro & Ethan Kochav

A Primer On Bitcoin Mining

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Executive Summary

Mining is an essential function of the Bitcoin network. It is one of the key features that enables Bitcoin to be an open payment network without the need for trust in a central coordinating entity. At a high level, mining is the security function of the network. Mining ensures that transactions reach their destination, funds are safely stored, and tens of thousands of computers around the world stay in sync. Bitcoin mining can be analogized to traditional mining; however, there are many nuances to Bitcoin mining that make it unlike traditional resource extraction. Overextending the metaphor can lead to misunderstandings of the bitcoin mining industry. This primer looks under the hood at Bitcoin mining. We explore how mining works, the industry structure and players, and the drivers of mining’s economics.

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