Bitcoin mining is the process that adds new blocks of transactions to the Bitcoin blockchain. It does two jobs at once: it decides which transactions are confirmed and in what order, and it issues new bitcoin on a fixed schedule. Without mining, nothing would stop someone from spending the same coins twice.
The design comes from the Bitcoin whitepaper, which Satoshi Nakamoto published in 2008. The first block was mined on January 3, 2009.
What Mining Actually Does
When someone sends bitcoin, the transaction is broadcast to a network of computers called nodes. Each node checks that the signature is valid and the coins have not already been spent. Valid transactions wait in a holding area known as the mempool.
Miners pick transactions from the mempool, usually those paying the highest fees, and assemble them into a candidate block. To get that block accepted, a miner must find a solution to a computational puzzle. The first to find one broadcasts the block, other nodes verify it, and the miner collects the reward.
This system is called Proof of Work. Producing a block costs real electricity and hardware, while checking a block is cheap and fast.
The Puzzle Miners Solve
The puzzle uses a hash function called SHA-256. A hash function turns any input into a fixed-length output that looks random.
Each block has a short header that includes a reference to the previous block, a summary of the block's transactions, a timestamp and a number called a nonce. Miners hash the header again and again, changing the nonce and other fields each time, until the result is below a target number set by the network. There is no shortcut. The only method is trial and error at enormous speed.
Because each block header contains the hash of the block before it, the blocks form a chain. Altering an old transaction would change that block's hash and break every block after it. The developer guide on mining explains the process in technical detail.
Difficulty Adjustment
Bitcoin aims for one block about every 10 minutes. Every 2,016 blocks, roughly every two weeks, the network looks at how long the last 2,016 blocks took and resets the target.
- If blocks came faster than 10 minutes on average, the puzzle gets harder.
- If blocks came slower, the puzzle gets easier.
This keeps issuance steady no matter how many machines are mining. Adding more miners does not create more bitcoin. It only raises the difficulty.
Hashrate and Security
Hashrate is the total number of hash attempts the network makes per second. It is a measure of how much work protects the chain.
To rewrite a confirmed transaction, an attacker would have to redo the Proof of Work for that block and every block after it, and then overtake the honest chain. That is only realistic for someone who controls more than half of the total hashrate, which is why it is called a 51% attack. Even then, the attacker could reverse their own recent payments or block transactions, but could not steal coins from other wallets or create bitcoin beyond the rules.
Each new block added on top of a transaction is called a confirmation. The more confirmations, the more work an attacker would need to undo.
Block Rewards and Halvings
Miners earn two things for each block:
- Block subsidy: newly created bitcoin.
- Transaction fees: the fees attached to every transaction in the block.
The subsidy halves every 210,000 blocks, about every four years.
- 2009: 50 BTC per block
- November 2012: 25 BTC
- July 2016: 12.5 BTC
- May 2020: 6.25 BTC
- April 2024: 3.125 BTC
The schedule ends when the supply reaches its cap of 21 million bitcoin, expected around the year 2140. After that, miners will be paid by fees alone. Whether fees can fund enough security in the long run is an open question that researchers still debate.
Mining Hardware and Pools
In 2009, people mined with ordinary computer processors. Graphics cards took over next. From 2013, purpose-built machines called ASICs (application-specific integrated circuits) replaced everything else. An ASIC miner does one thing, SHA-256 hashing, and does it far more efficiently than general hardware.
Mining is now an industrial business. Electricity is the main running cost, so a miner's profit depends on the bitcoin price, the difficulty, the efficiency of the machines and the power price.
A single machine would almost never find a block on its own. Most miners therefore join a mining pool, which combines the hashrate of many participants and splits rewards by contribution. Pools smooth out income, but a few large pools coordinate a big share of block production, which is a long-standing centralization concern.
Common Misunderstandings
- Miners do not solve useful math problems. The work is deliberate guessing whose only purpose is to make blocks costly to produce.
- Miners do not control Bitcoin's rules. Nodes reject any block that breaks the rules, no matter how much hashrate produced it.
- Home mining is rarely profitable. With normal household electricity prices, the power cost usually exceeds the reward.
- Cloud mining offers are a frequent source of scams. Be very careful with any service that promises fixed returns from mining.
Nothing in this article is financial advice.
Key Bitcoin Mining Facts
- Algorithm: SHA-256 Proof of Work
- Target block time: about 10 minutes
- Difficulty adjustment: every 2,016 blocks
- Halving interval: every 210,000 blocks
- Block subsidy: 3.125 BTC since April 2024
- Supply cap: 21 million BTC
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