How Bitcoin Mining Works

How Bitcoin Mining Works

A technical overview of Bitcoin mining for curious nerds.

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The Basics

Bitcoin mining is the process of:

1. Collecting transactions into a block
2. Finding a special number (nonce) that makes the block's hash meet a difficulty target
3. Broadcasting the valid block to the network
4. Receiving the block reward (currently 3.125 BTC + fees)

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The Block Header

Every Bitcoin block has an 80-byte header:

Field	Size	Description
Version	4 bytes	Block version number
Previous Block Hash	32 bytes	Hash of the previous block
Merkle Root	32 bytes	Hash of all transactions in the block
Timestamp	4 bytes	Unix timestamp
Difficulty Target	4 bytes	Compact difficulty representation
Nonce	4 bytes	The number miners iterate

┌────────────────────────────────────────────────────────────────────┐
│                        Block Header (80 bytes)                      │
├──────────┬─────────────────┬─────────────────┬──────────┬─────────┬───────┐
│ Version  │ Prev Block Hash │  Merkle Root    │Timestamp │ Bits    │ Nonce │
│ 4 bytes  │    32 bytes     │   32 bytes      │ 4 bytes  │ 4 bytes │4 bytes│
└──────────┴─────────────────┴─────────────────┴──────────┴─────────┴───────┘

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The Mining Process

Step 1: Get Work

The miner receives a block template from the pool (or Bitcoin Core):

• Previous block hash
• Transactions to include
• Coinbase transaction (where reward goes)
• Current difficulty target

Step 2: Build Header

The miner constructs the 80-byte header with:

• All fixed fields from the template
• A starting nonce (usually 0)

Step 3: Hash and Check

1. Compute SHA256(SHA256(header)) = hash
2. Check if hash < target
3. If yes → Found a block! Submit it.
4. If no → Increment nonce, go to step 1

Step 4: Submit Valid Block

When a valid hash is found:

1. Submit to pool or Bitcoin Core
2. Block propagates to network
3. Other nodes verify and accept
4. Miner receives reward

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SHA256d (Double SHA256)

Bitcoin uses double SHA256 for security:

hash = SHA256(SHA256(block_header))

Why Double?

1. Prevents length extension attacks
2. Defense in depth - if SHA256 is partially broken, double hashing helps
3. Satoshi's design choice

Example

Block 125552 header:

0100000081cd02ab7e569e8bcd9317e2fe99f2de44d49ab2b8851ba4a308000000000000
e320b6c2fffc8d750423db8b1eb942ae710e951ed797f7affc8892b0f1fc122bc7f5d74d
f2b9441a42a14695

SHA256d hash:

00000000000000001e8d6829a8a21adc5d38d0a473b144b6765798e61f98bd1d

Notice all the leading zeros - that's what makes it a valid block!

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Difficulty

What is Difficulty?

Difficulty is a measure of how hard it is to find a valid block. It adjusts every 2016 blocks (~2 weeks) to maintain ~10 minute block times.

The Target

The target is a 256-bit number. A valid block hash must be less than the target.

Difficulty 1 target:

0x00000000FFFF0000000000000000000000000000000000000000000000000000

This has ~32 leading zero bits.

Current Difficulty

As of 2025:

• Difficulty: ~148 trillion
• Required leading zeros: ~67-68 bits
• Target: astronomically small

Difficulty Adjustment

new_difficulty = old_difficulty * (2016 blocks actual time / 2 weeks)

If blocks were found too fast, difficulty increases. If blocks were found too slow, difficulty decreases.

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The Nonce

The nonce is a 32-bit number (0 to 4,294,967,295) that miners iterate.

The Problem

At 350 MH/s, you exhaust all 4 billion nonces in ~12 seconds. But blocks take 10 minutes on average!

The Solution: Extranonce

Pools provide an extranonce field in the coinbase transaction. When you exhaust the nonce space:

1. Increment extranonce
2. Recalculate merkle root
3. Start nonce from 0 again

This gives effectively unlimited search space.

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Pool Mining vs Solo Mining

Pool Mining

┌─────────┐     shares     ┌──────┐     block     ┌─────────┐
│  Miner  │ ─────────────> │ Pool │ ────────────> │ Network │
└─────────┘                └──────┘               └─────────┘
                              │
                              │ proportional reward
                              ▼
                         ┌─────────┐
                         │  Miner  │
                         └─────────┘

• Submit shares (low-difficulty proofs of work)
• Pool submits blocks to network
• Reward split among all miners proportionally
• Steady, predictable income

Solo Mining

┌─────────┐              block                ┌─────────┐
│  Miner  │ ─────────────────────────────────>│ Network │
└─────────┘                                   └─────────┘
                              │
                              │ full reward (if found)
                              ▼
                         ┌─────────┐
                         │  Miner  │
                         └─────────┘

• Submit directly to network (via pool or Bitcoin Core)
• You keep the entire block reward
• Extremely unlikely to find a block
• Lottery-style mining

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The Math of Solo Mining

At 350 MH/s vs Network (~700 EH/s):

Your hashrate:     350,000,000 H/s
Network hashrate:  700,000,000,000,000,000,000 H/s

Your share: 0.0000000000005%

Probability Per Day:

Hashes per day: 350 MH/s × 86,400 seconds = 30.24 trillion
Probability: 30.24T / (network_difficulty × 2^32) ≈ 1 in 13 trillion

Expected Time to Find Block:

1 / (probability per day) ≈ 37,000 years

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Why Mine Solo?

Despite the odds:

1. The Dream - One lucky hash = ~$300,000+
2. No Pool Fees - Keep 100% of the reward
3. Decentralization - Support the network
4. Learning - Understand Bitcoin deeply
5. Fun - It's a lottery ticket that does useful work

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See Also

• SHA256d Algorithm
• Metal GPU Implementation
• Difficulty and Target
• Mining Calculator