The Bitcoin Mining Deskbook

A one-stop shop to start your journey down the bitcoin mining rabbit hole.

Feb 26, 2023

People regularly ask me where they can go to learn more about Bitcoin mining. I usually reply by rattling off a few articles that are floating at the top of my head at the moment, offer to send them a few things when I get some time, and then promptly forget the conversation ever happened. If you’re reading this and I’ve done this to you, I’m sorry. This article is an attempt at rectifying these transgressions.

Below, I’ve collected and categorized some of the best Bitcoin mining content available today. Most of the content below is written by professionals in mining or mining-adjacent companies within the Bitcoin ecosystem. You’ll see that I rely heavily on the research teams at Hashrate Index, Braiins, Galaxy Digital, River, and NYDIG, among others. Together, these credible sources of expertise form a good starting point to develop a fairly complete understanding of Bitcoin mining as a whole.

I’m certainly biased, but I find bitcoin mining to be endlessly fascinating. It pairs large-scale infrastructure with software development, high finance with construction, and debates on human energy consumption with debates on block space utilization. I’ve been in the industry for two years now, and I still learn an astonishing amount almost every day. As a bitcoin miner, I never want for more intellectual stimulation.

It may be a bit arcane, particularly if you are new to bitcoin in general. I hope that whatever your background or level of bitcoin education and experience, you find this to be a useful tool with which to explore the wide and interesting world of bitcoin mining.

Now let’s dig in.

Bitcoin Basics

You are new to bitcoin in general. To understand mining, you need to have at least a cursory understanding of bitcoin as a digital asset, a proof-of-work protocol, and a global, censorship-resistant monetary network.

Mining Basics

You’re ready to dip your toe into bitcoin mining. This goes beyond the “computers solving complex math problems” explanation you’ve likely heard before, and gets into the specifics.

Mining and the Energy Debate

You’ve learned that bitcoin mining consumes prodigious amounts of electricity - in fact it is the most energy-dense form of computing in the world. This has caused consternation and moral panic amongst uninformed environmentalists, and has been used as a cudgel by intellectually dishonest bitcoin opponents seeking to delegitimize the industry for their own ends. What follows is a collection of content that brings context and nuance to your mining energy debate.

Mining, Policy, and Regulation

You’re ready to evangelize. Bitcoin mining, like the broader bitcoin ecosystem, is growing up. Like viral antibodies, a cohort of trade associations and advocacy groups has sprung up in recent years to advocate on behalf of the bitcoin protocol to legislators and policy makers at the local, state, and federal level. Some of these, like the Satoshi Action Fund, are specifically focused on policy advocacy around mining. Others, like the Bitcoin Today Coalition, are more broadly focused on bitcoin writ large but also have mining-focused initiative within them. Below are a few of the most notable groups, with links to helpful mining-focused resources from each organization.

Mining and Transaction Fees

Transaction fees are part of what incentivizes miners to deploy the eye-watering amounts of capital required to build and run mining infrastructure. As you’ll see in the next section, they’re also projected to play an increasing role in funding bitcoin’s security budget in the future. Below are some resources to better understand transactions fees as they related to mining.

Mining and Network Security

You can see that miners are the security forces of the global bitcoin network. Below, you can find resources to understand some of the security vulnerabilities of the bitcoin network, how mining helps to mitigate them, and some conceptual frameworks for understanding how mining-as-security will be incentivized in the future.

Civilizational Maximalist

Big bitcoin mining pools are not a centralization risk

In early January yet another article came out trying to make the case that large mining pools pose a centralization risk to Bitcoin. I saw it in a tweet, replied that I thought it was off-base, and was asked by someone to write a Substack explaining why…

2 years ago · 4 likes · Alex Brammer

Mining, ASICs, and Hashrate

Starting in 2012, bitcoin started requiring ASICs, or Application Specific Integrated Circuits, to mine efficiently and competitively. In part, this was because of the rapid growth in bitcoin’s global hashrate. What are ASICs and hashrate (also known as hashpower), you ask? Read below to find out.

Mining and “Hashprice”

Hashrate is a digital commodity produced and sold by miners. Hashprice is the price of this commodity. A whole world of derivatives is growing up around this commodity, and it is how miners think about their revenue. Read below to better understand how hashprice is calculated and how miners are using it to manage risk.

Mining Protocols and Pools

Mining is largely a physical infrastructure game - think steel in the ground, electricity flowing across conductors, and banks of thousands of ASICs. But it also requires its own unique digital infrastructure to serve its purpose of securing the network, appending transactions to the blockchain, and facilitating bitcoin’s token emission schedule. Mining protocols run by mining pools are how most miners convert their hashrate into bitcoin at the current hashprice. Read below to understand what a mining protocol is, and the role that mining pools play in today’s global mining ecosystem.

Mining and Bitcoin Node Architecture

Technically ASICs are “nodes” on the bitcoin network, but they do not serve the same purpose as the full nodes you have heard of. Read below for a quick primer on the difference between miners and nodes, and the formal documentation for how to run your own full node.

Mining and Energy Infrastructure

Given its large energy footprint, uniquely flexible nature, and location-agnostic operational requirements, bitcoin mining is increasingly being viewed as a tool to balance fragile grids, monetize wasted or stranded energy, and incentivize the construction of new generation assets. Many believe that bitcoin mining will become a widely used tool by generators and grid operators to help us navigate the energy transition responsibly. Below are a few resources to get you started down this rabbit hole.

Mining and Energy Arbitrage

Bitcoin mining is a way of arbitraging energy - a miner literally buys megawatt-hours from a grid operator or power generator, converts that energy into hashrate using ASICs, and then (most of the time) sells that hashrate to a pool for more than it cost to produce it. Read below to learn more about the logic of mining as an energy arbitrage method.

Mining and Risk Management

Miners, like any other commodity producer, must skillfully manage risk in order to survive the cyclical nature of the industry. 2022 was an object lesson in the absolute necessity of intelligent risk management and the consequences of failure. Traditionally miners have not taken a systematic approach to managing risk, but that is now changing with the advent of products like Luxor’s Hashprice Non-Deliverable Forward Contract and other hashprice derivatives.

Mining Commercial Strategy

The participants in the bitcoin mining industry vary widely in type, size, and strategy. Read below for a few different ways of thinking about the mining ecosystem and its players.

Mining Profitability Calculators

One of the most common questions I get is “how profitable is it to mine bitcoin?” Read below for a few different tools to determine mining profitability under varying market and business assumptions.

Mining and Ordinals

Can’t write an article on mining resources without including the current “current thing.” Read below for a few different takes on how mining and ordinals may interact as the nascent field of ordinal inscriptions matures.

Civilizational Maximalist

Don't censor the Bitcoin monkey jpegs! Ordinals FTW?

Sunday morning, apparently out of nowhere, bitcoin twitter exploded with people talking about something called Ordinals. As any good degen does, I saw this Twitter trend and the article by Dennis Porteaux that seemingly sparked it and I dug all the way in. In a few hours, I learned that “ordinals” was actually referring to…

2 years ago · 2 likes · 2 comments · Alex Brammer

NYDIG: Research Weekly - Ordinals and the Case of the Missing Fees

Mining and Bitcoin Improvement Proposals

Bitcoin Improvement Proposals are how bitcoin core developers communicate proposed improvements to the bitcoin protocol. These go through a consensus process, and if accepted by a super majority of the bitcoin ecosystem, get implemented through “soft forks.” Learn about how they apply to bitcoin mining below.

Hashrate Index: A Bitcoin Miner's Guide to Bitcoin Upgrades

Mining and Scam Avoidance

There are a few ways for retail to get into mining, usually involving buying a rig or handful of rigs and hosting them at a reputable retail hosting company like River Financial or Print Crypto. Cloud Mining, however, is almost always a scam, or at the very least, unprofitable relative to just buying spot bitcoin. Read below for a few notes on this scam-ridden corner of the mining ecosystem.

Mining and Waste Heat

ASICs produce an incredible amount of heat as they convert electricity into hashes (also known as doing “work” in the thermodynamic sense, hashes being the literal “proof” of work that is the namesake of the consensus algorithm underpinning the bitcoin protocol). In recent years, a cottage industry of monetizing this waste-heat has popped up. Read below for a high level survey.

Braiins: Green Innovation in Bitcoin Mining: Recycling ASIC Heat

Mining 2022 Year End Research Reports

Good research and data analytics platforms produce year-end reports that survey the state of the mining industry on an annual basis. 2022 was a watershed year for bitcoin mining, largely characterized by bankruptcies and pain amongst publicly traded miners and private miners alike, all while hashrate continued its inexorable march upwards. Here is a selection of some of the best reports that came out at the end of last year.

Conclusion

Mining is a tough space to break into and understand. But it’s also an incredibly welcoming space, with homes for people of almost every background imaginable. Whether you are an investor, a hobbyist, or someone entertaining the idea of joining the mining industry professionally, I hope this compendium has been helpful. I will be updating this as I discover new, high quality resources. If you have something you’d like me to add, please feel free to reach out directly. Thank you!

Civilizational Maximalist

The Bitcoin Mining Deskbook

A one-stop shop to start your journey down the bitcoin mining rabbit hole.

Bitcoin Basics

Mining Basics

Mining and the Energy Debate

Mining, Policy, and Regulation

Mining and Transaction Fees

Mining and Network Security

Mining, ASICs, and Hashrate

Mining and “Hashprice”

Mining Protocols and Pools

Mining and Bitcoin Node Architecture

Mining and Energy Infrastructure

Mining and Energy Arbitrage

Mining and Risk Management

Mining Commercial Strategy

Mining Profitability Calculators

Mining and Ordinals

Mining and Bitcoin Improvement Proposals

Mining and Scam Avoidance

Mining and Waste Heat

Mining 2022 Year End Research Reports

Conclusion

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