Bitcoin is mined by specialized computers racing to solve a mathematical puzzle, and the first one to find the answer earns newly created bitcoin as a reward. The current reward is 3.125 bitcoin per solved puzzle (called a “block”), and the entire process is designed to repeat roughly every 10 minutes, around the clock, across a global network of machines.
The Puzzle Miners Are Solving
Every bitcoin transaction needs to be verified and recorded on the blockchain, which is Bitcoin’s shared public ledger. Transactions get bundled into groups called blocks. Before a block can be added to the chain, a miner has to prove they’ve done a significant amount of computational work. This system is called “proof of work.”
Here’s what actually happens. A miner’s software assembles a block containing recent transactions, then feeds the block’s data through a cryptographic hash function, which is essentially a formula that takes any input and produces a fixed-length string of characters. The output looks something like 0000000000000000000a3b7c.... The goal is to produce an output that falls below a specific threshold set by the network, called the difficulty target.
The miner can’t reverse-engineer the answer. The only option is to keep tweaking a variable in the block called the nonce (a “number used once”), run the hash function again, check the result, and repeat. Miners cycle through billions of nonce values per second until one of them, somewhere in the world, lands on a hash that meets the target. When that happens, the block is broadcast to the network, other nodes verify it, and it gets permanently added to the blockchain.
What’s Inside a Block
Each block contains a header with six key fields: the software version, the previous block’s hash (which chains blocks together), a Merkle root (a single hash representing all transactions in the block), a timestamp, the difficulty target, and the nonce. Below the header sit a transaction counter and the actual list of transactions. The previous block’s hash is what makes the blockchain tamper-resistant. Changing even one transaction in an old block would break the hash chain all the way forward.
How Difficulty Stays Balanced
Bitcoin is designed to produce one new block approximately every 10 minutes, regardless of how many miners are competing. To maintain that pace, the network automatically adjusts its difficulty target every 2,016 blocks, which works out to roughly every two weeks.
If miners have been finding blocks faster than every 10 minutes during that period, difficulty increases, meaning the target number miners must get below shrinks and valid hashes become harder to find. If blocks have been coming in slower than 10 minutes, difficulty decreases. The adjustment is capped so it can change by no more than four times in either direction during a single period. This keeps the system stable even when large amounts of mining power suddenly join or leave the network.
The Hardware You Need
In Bitcoin’s early years, you could mine with a regular laptop. That era is long gone. Today, mining requires ASICs (application-specific integrated circuits), chips built to do nothing but run Bitcoin’s hashing algorithm as fast as possible. General-purpose computers can’t come close to competing.
Current-generation ASIC miners range widely in price and performance. On the smaller end, devices like the Bitaxe Gamma Turbo produce about 2.4 trillion hashes per second (Th/s) while consuming 35 watts of power and costing around $208. Mid-range options like the NerdMiner NerdQaxe+ hit 2.5 Th/s at 50 watts for about $489. These smaller units are popular with hobbyists and home miners, but they represent a tiny fraction of the hash power on the network. Large-scale mining operations run warehouses filled with thousands of higher-powered machines producing hundreds of terahashes per second each.
Beyond the hardware itself, electricity is the biggest ongoing cost. A mining operation’s profitability depends heavily on its electricity rate, since machines run 24 hours a day and generate significant heat that often requires additional cooling.
Why Most Miners Join Pools
The odds of a single miner solving a block alone are extremely small. With millions of machines competing globally, solo mining is like buying one lottery ticket in an enormous drawing. To smooth out their income, most miners join mining pools, where thousands of participants combine their computing power and split the rewards proportionally based on how much work each member contributed.
Pool fees typically range from 0% to 3% of the block reward, with most established pools charging between 1% and 2.5%. How you get paid depends on the pool’s payout model. Pay-Per-Share (PPS) gives you a predictable payout for each unit of work you submit, but fees tend to be higher, around 2% to 3%. Pay-Per-Last-N-Shares (PPLNS) charges lower fees of 1% to 1.5% but introduces more variability, since your payout depends partly on whether the pool gets lucky finding blocks during a given stretch. Full Pay-Per-Share (FPPS) works similarly to PPS but also distributes transaction fees from the block, not just the block reward itself.
Block Rewards and Halving
When a miner (or pool) successfully mines a block, they receive two things: the block reward, which is newly created bitcoin, and all the transaction fees from the transactions included in that block. The block reward is currently 3.125 bitcoin, set by the April 2024 halving event.
Bitcoin’s code cuts the block reward in half approximately every four years, an event called the “halving.” When Bitcoin launched in 2009, the reward was 50 bitcoin per block. It dropped to 25 in 2012, then 12.5 in 2016, 6.25 in 2020, and 3.125 in 2024. The next halving is expected around April 2028, when the reward will fall to 1.5625 bitcoin. This schedule continues until all 21 million bitcoin have been issued, which is projected to happen around the year 2140. After that, miners will earn only transaction fees.
Energy and Environmental Impact
Bitcoin mining consumes a substantial amount of electricity. A study from Cambridge Judge Business School estimates the network’s annual electricity consumption at roughly 138 terawatt-hours, about 0.5% of all electricity used globally. That’s comparable to the energy consumption of some mid-sized countries.
The energy mix has shifted over time. Sustainable energy sources now account for an estimated 52.4% of Bitcoin mining’s power consumption, up from 37.6% in 2022. That figure includes 42.6% from renewables like hydropower and wind, plus 9.8% from nuclear. Natural gas has replaced coal as the single largest non-renewable energy source powering the network. Many mining operations deliberately seek out cheap renewable energy or locate near stranded energy sources (power that would otherwise go unused) to reduce costs.
The Mining Process, Step by Step
- Transactions enter the mempool. When someone sends bitcoin, the transaction sits in a waiting area called the mempool until a miner picks it up.
- A miner assembles a candidate block. Mining software selects transactions from the mempool (generally prioritizing those with higher fees), packages them into a block, and fills in the block header fields.
- Hashing begins. The miner’s ASIC hardware runs the block header through the SHA-256 hash function, trying different nonce values at enormous speed.
- A valid hash is found. When the output falls below the difficulty target, the miner has a valid proof of work.
- The block is broadcast. The winning miner sends the completed block to the rest of the network. Other nodes independently verify that the hash is valid and that all transactions in the block follow the rules.
- The block joins the chain. Once verified, the block is appended to the blockchain. The miner receives the block reward plus transaction fees, and the process starts over with a new block.
This entire cycle repeats roughly every 10 minutes. Every miner who didn’t win discards their current work, grabs any new transactions from the mempool, and starts racing again on the next block.