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Mining

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Mining

Tags: mining, SHA256, PoW, hash-rate, difficulty, nonce, ASIC

What Mining Is

Bitcoin mining is the process of:

  1. Collecting pending transactions from the mempool into a candidate block
  2. Finding a valid Proof of Work hash for that block
  3. Broadcasting the valid block to the network
  4. Receiving the block reward (new bitcoin subsidy + transaction fees)

Mining simultaneously: confirms transactions, secures the network, and issues new bitcoin on a predetermined schedule.

Source: raw/Theory/protocol/mining-walkthrough.md (Arman The Parman / Bitcoin Magazine), raw/Books/izobretaem-bitkoin/glava-4.md

SHA-256: The Hash Function

Bitcoin uses the SHA-256 (Secure Hash Algorithm, 256-bit) hash function. Properties:

  • Fixed output size: Any input → always a 256-bit (64 hex character) output
  • Deterministic: Same input always produces the same output
  • Avalanche effect: Tiny input change → completely different output
  • One-way: Cannot reverse a hash to find its input
  • Collision resistant: No two different inputs produce the same output (in practice)

Bitcoin actually applies SHA-256 twice (SHA-256d) for block hashing.

Example: SHA-256(“1”) = 6b86b273ff34fce19d6b804eff5a3f5747ada4eaa22f1d49c01e52ddb7875b4b

The Nonce and the Mining Process

A block header contains:

  • Previous block hash
  • Merkle root of transactions
  • Timestamp
  • Difficulty target
  • Nonce (a 32-bit number that miners vary)

The mining loop:

  1. Construct a candidate block
  2. Hash the block header with SHA-256d
  3. Check if the hash is below the difficulty target (starts with enough zeros)
  4. If not: increment the nonce and try again
  5. If yes: broadcast the valid block and collect the reward

A valid hash looks like:

00000000000000000002fca...

The required number of leading zeros is determined by the difficulty target.

How many attempts? At Bitcoin’s current difficulty, miners must try trillions of nonces per second before finding a valid hash. This is intentional — it makes finding a block expensive and finding a fake history impossibly expensive.

Difficulty Adjustment

Every 2,016 blocks (~2 weeks), all nodes independently recalculate the difficulty target:

new_target = old_target × (actual_time / 1,209,600 seconds)

Where 1,209,600 seconds = 2 weeks (the ideal time for 2,016 blocks at 10 minutes each).

If blocks came fast (miners joined): target decreases → harder to find valid hashes → slower blocks. If blocks came slow (miners left): target increases → easier to find valid hashes → faster blocks.

The adjustment always seeks the ~10-minute average. This makes Bitcoin’s block schedule remarkably stable despite massive swings in hash rate (e.g., the 2021 China mining ban cut global hash rate by ~50% overnight — difficulty adjusted down within 2 weeks and hash rate recovered).

Hash Rate

Hash rate = number of SHA-256d hashes a miner (or the network) can perform per second.

UnitHashes/second
1 TH/s (terahash)10¹²
1 EH/s (exahash)10¹⁸

Bitcoin network hash rate as of 2024: ~500–700 EH/s. A single modern ASIC miner produces ~100–200 TH/s.

ASIC Miners

ASIC (Application-Specific Integrated Circuit): Chips designed exclusively to compute SHA-256 hashes. Far more efficient than CPUs or GPUs for this task.

Key ASICs:

  • Antminer S19 XP: ~140 TH/s, ~3,000W
  • Whatsminer M50S: ~126 TH/s, ~3,276W

ASICs made GPU mining obsolete for Bitcoin around 2013. The specialization of ASICs is a deliberate feature: ASICs require significant capital investment and cannot be easily repurposed, raising the cost of a 51% attack.

Mining Pools

Solo mining at current difficulty would take an individual miner thousands of years to find a block. Mining pools combine hash rate and share rewards proportionally. Pools smooth income variance but introduce some centralization concerns.

Top pools by hash rate share (approximate, varies): Foundry USA, AntPool, ViaBTC, F2Pool.

Pool centralization is watched carefully — if any pool approaches 50% of hash rate, the community notices and miners shift voluntarily.

The Block Reward

Block reward = block subsidy + transaction fees.

Halving epochSubsidy
2009-201250 BTC
2012-201625 BTC
2016-202012.5 BTC
2020-20246.25 BTC
2024-20283.125 BTC

After the subsidy reaches zero (~2140), miners are compensated entirely by transaction fees. The sources argue this is sufficient for network security — as Bitcoin adoption grows, fee revenue will increase even as the subsidy drops. See scarcity].

Energy and Environment

Bitcoin mining consumes significant energy — this is intentional (PoW security requires cost). Key arguments from the sources:

  1. Stranded energy: Mining is location-independent, so miners move to wherever energy is cheapest — often excess renewable energy that would otherwise be curtailed
  2. Comparison: Fiat monetary system (banks, central banks, mints, military for petrodollar) consumes far more energy
  3. Jevons Paradox: Energy efficiency improvements tend to increase total energy consumption — not unique to Bitcoin
  4. Incentive for renewables: Bitcoin miners create demand for cheap, stranded renewable energy, potentially accelerating renewable deployment

Source: raw/Theory/economics/bitcoin-is-not-harmful-for-the-environment.md, gradually-then-suddenly] Part 4.

Sources

Glossary | Proof of Work | halving | Bitcoin | full nodes | UTXO | Satoshi Nakamoto | network effects

  • proof-of-work] — the underlying mechanism
  • scarcity] — mining as the issuance mechanism
  • bitcoin] — the system mining secures
  • glossary] — ASIC, nonce, hash rate, mining pool, block reward defined

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