Mining requires large, expensive machines that compete to solve complicated math problems in real time. The computations get continuously harder, and so the machines are getting more advanced to keep up, and more expensive as a result. The best ones cost thousands of dollars.
Mining doesn’t require the human being to physically sit and solve those formulas—you can plug it in, download the proper mining software, and let it run; the machine does the work.
As the machines race to do their computations, they burn through a lot of electrical power, make a lot of noise, and generate a lot of heat—enough to heat your house in the winter. (Notice how this custom rig comes with seven fans.)
While the system is designed to be decentralized, around 5 large “mining pools” controlled by a handful of companies dominate about 75% of the market. These mining pools, the bulk of which are in China, use huge amounts of power. The amount of energy used by computers “mining” bitcoin last year was greater than the annual usage of almost 160 countries.
via Yahoo Finance Explainer: How bitcoin mining works [Video]