Bitcoin mining is how new blocks of transactions get added to Bitcoin's public ledger, and how new bitcoin is created. Miners run specialised machines that compete to add each block. The winner earns a block reward of new bitcoin, currently 3.125 BTC per block after the April 2024 halving, plus the fees in that block. Mining today is a capital-heavy business run on dedicated machines, not a side hustle.
For most people in India who want to own some Bitcoin, buying a small amount of sats is far simpler than mining it. I learned that early. Back in the Bangalore meetup days, our group pooled some bitcoin and sent someone to New York to bring back a couple of Avalon mining machines. The project failed. This guide explains what miners do, why the reward keeps halving, and what our little experiment taught us.
The short answer
- What mining does: adds new blocks to Bitcoin's ledger, secures the network, and issues new coins.
- Who gets paid: the miner who adds a block earns the block reward plus transaction fees.
- Reward today: 3.125 BTC per block since April 2024, halving again around 2028.
- For most people: buying small amounts of sats is the practical way to own Bitcoin.
What miners actually do
Bitcoin has no central server that decides which transactions are valid. Instead, thousands of computers around the world keep copies of the same ledger. The question is how they agree on what goes in next.
The Bitcoin whitepaper's answer is proof-of-work. Miners gather pending transactions into a candidate block, then race to find a number that makes the block meet a difficulty target. Finding it takes enormous amounts of trial and error, which costs real electricity and hardware. Checking it takes almost nothing. When a miner finds a valid block, everyone else verifies it and moves on to the next one.
That cost is the point. Rewriting Bitcoin's history would mean redoing all that work faster than the rest of the network combined, which is what makes the ledger so hard to tamper with. The network adjusts the difficulty so that blocks keep arriving roughly every ten minutes, no matter how many miners join or leave.
How miners get paid
The whitepaper describes the block reward as the incentive for honest work. Each new block lets its miner create a set amount of brand-new bitcoin for themselves, plus collect the fees that users attached to their transactions. It's the only way new bitcoin enters circulation, and it's how the supply reaches its cap of 21 million coins.
Our Avalon experiment
In 2012 and 2013, I was running Bitcoin meetups in Bangalore. We started in coffee shops, outgrew them, and moved to the Leela Palace, where about a hundred people came on Saturdays. We talked about Bitcoin and we tried things.
One day we decided to try mining. A group of us put some bitcoin together, and we sent someone to New York to pick up a couple of Avalon machines, dedicated Bitcoin mining hardware.
It didn't work. The mining project failed. We kept trying other things, a conference, and eventually Unocoin, which we launched in December 2013.
I tell this story because it captures something every Indian reader thinking about mining should hear. Mining isn't like buying Bitcoin. It's a hardware business, an electricity business and an operations business, competing against the whole world. We had real bitcoin and real enthusiasm, and it still didn't work out for us. Enthusiasm isn't a mining strategy.
Why the reward keeps halving
Bitcoin's issuance is fixed in its software. When Bitcoin started in 2009, the block reward was 50 BTC. Every 210,000 blocks, roughly every four years, it's cut in half. Halvings happened in 2012, 2016, 2020 and April 2024, when the reward fell from 6.25 BTC to 3.125 BTC. The next is expected in 2028, which will cut it to 1.5625 BTC. The exact date depends on how quickly blocks arrive.
Because the reward keeps halving, the total supply approaches 21 million and stops just under it. The last fraction of a bitcoin is expected to be mined around the year 2140. After that, miners will earn only from transaction fees.
For miners, every halving cuts the new-coin part of their income in half overnight. Only the most efficient operations, with cheap power and the latest machines, tend to cope. That's one more reason mining has become a business for specialists.
What happens when the rewards run out
A question people often ask me: if new coins stop around 2140, why would anyone keep mining?
The answer is fees. Every Bitcoin transaction can carry a fee for the miner who includes it in a block. Block space is limited, so when many people want to transact, they bid for it. As the block reward shrinks with each halving, fees make up a larger share of what miners earn. Once issuance ends, miners will be paid from fees alone.
Fees also keep miners doing the job that matters most: making confirmed transactions effectively irreversible. Meanwhile, the network keeps adjusting difficulty so blocks arrive about every ten minutes, whether there are many miners or few.
For a buyer in India, this is part of why the supply schedule is credible. It doesn't depend on anyone's goodwill. It depends on incentives that keep working after the last new coin is mined.
Mining in India: what to think about
I won't give you a profitability calculation, because any such number depends on electricity prices, machine efficiency, Bitcoin's price and network difficulty, all of which change. What I can tell you is what to think about before you spend a rupee.
- Power: mining machines run around the clock and draw a lot of electricity. Your tariff and the reliability of your supply matter.
- Heat and noise: dedicated miners are loud and hot. They aren't something you run in a flat.
- Hardware: machines lose relevance as newer, more efficient ones arrive, and every halving cuts the reward per block.
- Tax: Bitcoin is a virtual digital asset. Transfers are taxed at a flat 30% plus 4% cess, with 1% TDS where it applies and no loss set-off. Talk to a CA about how your mining would be treated.
- Scams: be wary of "cloud mining" schemes and phone apps that promise daily Bitcoin earnings. If someone promises returns, walk away.
Mining vs buying sats, for most people
Here's how I'd put it to a friend. Miners are paid to secure the network. Most people don't need to do that job to own a piece of what it secures.
One bitcoin is 10 crore satoshis. On Unocoin you can buy from ₹10 through a Systematic Buying Plan, with ₹0 SBP fees, and the IndiaBitcoin home page shows how many sats ₹10, ₹100 and ₹1,000 buy at the live price. You skip the hardware, the electricity and the noise.
That doesn't make buying risk-light. Bitcoin's price can fall sharply, crypto products are unregulated in India, and there may be no regulatory recourse for any loss. But for someone who wants to understand Bitcoin and own a small amount, it's a far more practical first step than a machine in the corner.
If you're just starting out, our Learn page covers what Bitcoin is, how the 21 million cap works, how to keep it safe and how it's taxed, in one place.
Common questions
What is Bitcoin mining?
Mining is the process of adding new blocks of transactions to Bitcoin's public ledger. Miners use computing power to compete for the right to add each block, and the winner earns a block reward of new bitcoin plus the transaction fees in that block. It is both how the network is secured and how new coins are issued.
Can I mine Bitcoin on my phone?
Not in any meaningful way. Bitcoin mining today is done with dedicated machines built only for mining. Apps that claim to let you mine Bitcoin on a phone deserve suspicion, especially if they ask you to pay, invite friends, or share personal details.
What happens to mining when the reward halves?
Every 210,000 blocks, roughly every four years, the new-coin reward per block is cut in half. The most recent halving, in April 2024, cut it from 6.25 to 3.125 BTC. Miners earn fewer new coins per block, and over the long run their income shifts toward transaction fees.
Is mining income taxed?
Bitcoin is a virtual digital asset under Indian tax law, and transfers of VDAs are taxed at a flat 30% plus 4% cess with 1% TDS where it applies. Tax guides note that for mined coins the cost of acquisition is treated as zero when you later sell, and electricity and hardware costs are not deductible against that 30%. Your facts matter, so speak to a CA before you start.