How Bitcoin Mining Works, Step by Step
A plain-English walkthrough of how miners secure the Bitcoin network and earn rewards.
The basic idea
Bitcoin has no bank or company confirming payments. Thousands of computers called nodes follow the same rules, and miners compete to add the next batch of transactions, called a block, to a shared ledger known as the blockchain.
Step by step
- Transactions wait in line. New transactions are broadcast to the network and sit in a pool of unconfirmed transactions called the mempool.
- A miner builds a candidate block. The miner bundles transactions and runs the block through a hash function (SHA-256) again and again, changing a number called a nonce each time.
- The network sets a target. A valid answer is a hash below the difficulty target. Finding one takes enormous numbers of guesses, but anyone can verify it with a single check.
- The first valid solution wins. That miner broadcasts the block, nodes verify it, and it is added to the chain.
- The miner is paid. The reward is newly issued bitcoin plus the transaction fees in the block.
Why difficulty adjusts
Bitcoin aims for a new block about every 10 minutes. Roughly every 2,016 blocks, about two weeks, the network adjusts difficulty up or down based on how quickly blocks were found. When more miners join, mining gets harder.
What is a halving?
The block reward is cut in half every 210,000 blocks, roughly every four years. At the time of writing the reward is 3.125 BTC per block. Over time, transaction fees are expected to make up a larger share of miner income.
Why most people use pools
Mining alone means winning a block only rarely. Pools combine many miners' hash power and share rewards in proportion to work contributed, which smooths income in exchange for a fee.
What this means for you
Bitcoin mining today is dominated by specialized hardware called ASICs, so ordinary computers cannot compete. Before buying anything, read our guide on estimating mining profitability and try the power cost estimator.