Bitcoin mining

Miners bundle pending payments into a block and race to find a header that hashes below the network target. The winner takes the subsidy, 3.125 coins since April 20, 2024, plus every fee in the block. For a buyer, mining is why confirmations exist and why nobody can quietly reverse your purchase.

How it works

Mining is a lottery drawn roughly every ten minutes, and the only way to buy more tickets is to buy more electricity.

A miner picks transactions out of its mempool, builds a candidate block, and hashes that block's 80 byte header over and over, changing a counter between attempts, until the result lands below the target the network currently enforces. There is no clever shortcut, which is the entire point: the search is trial and error, so the number of tries is a direct measure of money spent. The counter itself is only 4 bytes wide, so a current machine burns through all 4,294,967,296 values in a fraction of a second and has to vary something else as well, either extra bytes inside the coinbase transaction, the block timestamp, or the spare version bits standardized as version rolling in BIP320.

The moment a valid header turns up, the miner publishes the block and the race resets. Every node rechecks the answer in well under a millisecond, because running two SHA-256 passes over 80 bytes is trivial next to finding them. The block's first transaction, called the coinbase transaction, pays the finder: a fixed subsidy set by the issuance schedule, plus the fees attached to every transaction the miner chose to include. Those particular coins are frozen for 100 further blocks, roughly sixteen hours and forty minutes, which stops a miner from spending a reward that a chain reorganization might erase.

Issuance runs on rails. The subsidy started at 50 coins, halves every 210,000 blocks, and has stood at 3.125 coins since the fourth halving. Follow the schedule far enough out and the subsidy rounds away entirely, leaving fees as the only pay. Note what does not appear anywhere in that description: a decision maker. Difficulty, not revenue and not management, controls the pace, so whatever the price does, the network keeps aiming at ten minute blocks.

Why this matters when you buy bitcoin

Almost nobody buying bitcoin today should mine it instead, because mining is an industrial business with an electricity bill attached and buying is a two minute transaction.

The gap is not close. A competitive machine costs thousands of dollars, draws as much power as a domestic oven running without a break, and earns a slice of revenue the market prices in the open as hashprice, which the Hashrate Index roundup put near 32 dollars per petahash per day in early August 2026 after years of decline. At a residential electricity tariff, that loses money before you count the hardware. Buying the same exposure on an exchange costs a fee measured in tenths of a percent and works in a rented flat.

Legality is the part people get wrong, because a country can treat holding and mining as completely separate questions. Across the 231 country guides on this site that split shows up constantly. Mainland China bans the industry outright. Iran licenses mining under a state framework while its central bank keeps banks away from crypto payments. Bhutan mines with state hydropower through Druk Holding and Investments while licensing no exchange at all, so the government is a miner in a country where ordinary buying is hard. Paraguay hosts large hydro powered farms with no dedicated licensing regime for either activity. Check both questions for your own country instead of assuming one answer covers the other.

Mining also decides whose transaction moves first. Miners fill the space in a block with the fee rates that pay best, so the fee your wallet suggests is a bid in a live auction, not a published price, and a withdrawal sent at a bargain rate can sit unconfirmed through several blocks while higher bidders go ahead of it.

Block 210,000, the first halving

Block 210,000 shows what mining is and is not, because it is the block where the pay changed and nothing else did.

Mined on November 28, 2012, it was the first block whose coinbase transaction paid 25 coins rather than 50. Revenue per block fell by half that evening for every miner at once. The block interval barely twitched, because the schedule that halves the subsidy has nothing to do with the arithmetic that sets difficulty. Machines that no longer paid for their power switched off over the following weeks, the remaining hash rate found blocks slightly more slowly, and the next retarget corrected for it. That pattern has now repeated at four halvings. It is why the prediction that a halving will break mining keeps failing: the protocol has no opinion about how many miners exist, only about how fast they collectively find blocks.

Bitcoin mining vs proof of work

Bitcoin mining is the activity; proof of work is the rule that makes the activity worth anything. Proof of work is a validity condition written into the consensus rules, and a header that fails it is not a block at all. Mining is the industry that grew up around satisfying that condition, complete with power contracts, hosting agreements, and quarterly earnings calls. Other systems use proof of work with no mining industry attached, and a listed mining company can run for years without a single shareholder understanding the rule that pays them.

Bitcoin mining vs hash rate

Bitcoin mining is what miners do; hash rate is how much of it is happening. Hash rate is the aggregate speed of the search, quoted in hashes per second, and it is an estimate derived from how quickly blocks appear. Mining is the business that produces that number: machines, buildings, staff, and megawatts. Hash rate can hold perfectly steady while the mining industry changes hands completely, which is close to what happened after China's ban, when the fleet moved continents and the ledger barely noticed.