What is mining?

The process by which some blockchains, including Bitcoin, validate transactions and issue new coins, using computers to solve computational puzzles.

Mining consumes significant electricity and is impractical for individuals on major chains. It is the mechanism behind proof-of-work, which Bitcoin still uses and Ethereum abandoned in 2022 when it moved to proof-of-stake.

The common confusion is thinking miners solve something useful, or that they verify transactions by checking them by hand. Neither is true. Miners repeatedly hash a block header with a changing value until the result falls below a target, which is a lottery with no output beyond the proof that the work was done. The verification of transactions is done by every node on the network for free.

How it works

1. A miner collects pending transactions from the mempool, ordered largely by fee rate, and assembles a candidate block.
2. It hashes the block header repeatedly, changing a value called the nonce each time, searching for a hash below the current target.
3. Finding one is pure chance proportional to hash rate. There is no shortcut and no partial credit.
4. The winner broadcasts the block. Every other node checks it in milliseconds, which is the asymmetry the whole design rests on: hard to produce, trivial to verify.
5. The miner pays itself the block subsidy plus the fees of the included transactions, in a special first transaction of the block.

The network adjusts the target so that blocks arrive at a steady average rate regardless of how much hardware is competing. On Bitcoin that adjustment happens every 2,016 blocks, targeting an average of one block every 10 minutes (source: the Bitcoin protocol rules described in the Bitcoin white paper and implemented in Bitcoin Core).

The subsidy halves on a fixed schedule, which is what makes issuance predictable and declining. Over time, transaction fees are designed to replace it as the miner's income.

Example

Illustrative arithmetic on why solo mining fails at scale. Suppose a home machine represents one millionth of total network hash rate. Blocks arrive roughly every 10 minutes, or 144 per day.

That miner expects to find 144 divided by 1,000,000 blocks per day, which is one block roughly every 19 years. The expected value is not zero, but the variance makes it useless as income, and this is the entire reason mining pools exist. Meanwhile the electricity runs continuously, and it is the electricity bill, not the hash rate, that usually decides whether the operation makes sense.

Why it matters when you buy

Mining does not affect how you buy, but it explains two things you will meet as a buyer. New supply enters the market through miners who generally sell to cover costs, which is a structural source of selling that unlock schedules make explicit for other assets. And confirmation times you wait through on a withdrawal are a consequence of this design. The measured throughput and fee figures per network are on the chain rankings.

Related terms

• proof of work — the consensus mechanism mining implements
• hash rate — how much work is competing
• difficulty adjustment — what keeps block times steady
• mining pool — how individuals smooth payouts
• block subsidy — the newly issued half of the reward
• bitcoin halving — the scheduled cut to issuance

Questions

Does mining verify my transaction?

Not in the sense people expect. Every node verifies transactions. Mining decides which valid transactions get ordered into the next block and makes rewriting that order expensive.

Is Bitcoin mining still worth doing?

At an industrial scale with cheap power, it is a business. For an individual on retail electricity, the hardware and power costs almost always exceed the expected reward on major chains.

Do all cryptocurrencies use mining?

No. Ethereum and most newer chains use proof-of-stake, where validators post collateral instead of consuming electricity. Mining is now a minority mechanism by number of chains, though Bitcoin remains the largest asset using it.