Mining & proof of work

In mining, specialised computers race to solve a computing puzzle. The winner writes the next block. This sets the order of transactions, brings new bitcoin into circulation and makes it extremely expensive to rewrite the past.

Why Bitcoin needs mining

Without a central authority, the network needs a rule for who writes the next block. A vote per participant could be rigged with fake identities. So the whitepaper counts computing power: one vote per processor, not per IP address.^[1]

This method is called proof of workGlossaryProof of workThe method by which miners prove that they have done real computing work for a new block. It lets the network agree on the valid chain without a central authority, and makes rewriting old blocks extremely expensive.On the learning path: Stage 1 · Step 3 – How does Bitcoin work? →In the glossary →×. Whoever proposes a block proves that they have spent real computing work – that is, electricity and money. Anyone wanting to change an old block would have to redo the work for that block and every block after it, and overtake the rest of the network while doing so.^[1]

The computing puzzle: hash, nonce and target

At its core is a hashGlossaryHash (hash value)A fixed-length digital fingerprint that a hash function calculates from any data. Even the tiniest change produces a completely different value, and the original data can’t be worked out from the hash.On the learning path: Stage 1 · Step 3 – How does Bitcoin work? →In the glossary →× function. It turns any data into a fingerprint of fixed length. Change a single character and you get a completely different one. Bitcoin hashes the block header twice in a row with SHA-256GlossarySHA-256A standardised cryptographic hash function that calculates a 256-bit fingerprint from any data. Bitcoin uses it for mining and identifiers – and even hashes the block header twice in a row.On the learning path: Stage 1 · Step 3 – How does Bitcoin work? →In the glossary →×.^[2]

The task: find a block header whose hash is less than or equal to a target value – simplified: one that starts with enough zeros.^[4] To do this, miners change a number in the block header, the nonceGlossaryNonceA 4-byte number in the block header that miners change over and over during proof of work until the hash of the block header is less than or equal to the target. Each new value is a new attempt.On the learning path: Stage 1 · Step 3 – How does Bitcoin work? →In the glossary →×, and hash again. Once they have tried every nonce value, they change the timestamp or the block’s first transaction and start over.^[2]

Finding the solution takes an enormous amount of computing work; checking it takes a single hash calculation. So every node can instantly check whether a block meets the requirement.

Each additional leading zero (in hexadecimal notation) means 16 times as many attempts on average. Try it in the hash lab: your browser calculates real SHA-256. Set the difficulty from 3 to 5 zeros and compare the number of attempts.

The difficulty adjustment: every 2,016 blocks

Bitcoin aims for one block every ten minutes. Every 2,016 blocks – exactly two weeks at that pace – each node compares how long those blocks actually took and calculates a new target:^[3],[4]

• If blocks came faster than one every ten minutes on average, the puzzle gets harder.
• If they came slower, it gets easier.
• Each adjustment changes the difficulty by at most a factor of four.^[4]

This difficulty adjustmentGlossaryDifficulty adjustmentEvery 2,016 blocks, each node recalculates the mining target so that on average a block is created roughly every ten minutes – regardless of how much computing power is currently at work in the network.On the learning path: Stage 2 · Step 2 – Halving & 21 million →In the glossary →× keeps the issuance schedule stable, whether suddenly twice or half as many devices are computing.

Where the network stands right now:

• Estimated computing power (hashrateGlossaryHashrate (computing power)How many hash attempts per second a mining device or the whole network makes. The network hashrate shows how much computing work secures Bitcoin.In the glossary →×): 964 EH/s. EH/s means exahashes per second; 1 EH/s is a quintillion (10¹⁸) attempts per second.
• Difficulty: 132.7 T (T = trillion) – that many times harder than at the start in 2009
• Next adjustment: in 1,680 blocks, estimated at +2.3%

The reward: new bitcoin plus fees

Whoever finds a valid block pays themselves the block rewardGlossaryBlock rewardWhat a miner receives for a valid block: newly created bitcoin (the subsidy) plus the fees of all transactions in the block. The subsidy halves every 210,000 blocks; on 20 April 2024 it fell to 3.125 BTC.On the learning path: Stage 2 · Step 2 – Halving & 21 million →In the glossary →× in its first transaction.^[1] It has two parts:

1. Newly created bitcoin (subsidy): 50 BTC per block at first, halved every 210,000 blocks, currently 3.125 BTC.^[5] This is the only way new bitcoin come into existence.
2. Transaction fees: the sum of the fees of all transactions in the block. Transactions & fees explains where they come from.

In the 144 blocks up to 28 September 2026 – about one day – miners received a total of 452.63 BTC, of which only 2.63 BTC were fees, around 0.6%.^[7] Because the subsidy halves roughly every four years, fees will have to pay for the network’s security in the long run; whether they will be enough is an open question. The halving & the 21 million explains the issuance schedule.

Paying out more than allowed doesn’t work: the nodes reject such a block, and the computing work is wasted. Miners decide the order of transactions, not the rules.

Mining pools: rolling the dice together

Alone, mining is a lottery. At the difficulty of 28 September 2026, a professional device with 200 TH/s would wait around 90 years on average for a block of its own; a small hobby device with 1.2 TH/s, around 15,000 years (own calculation).^[6]

That is why most miners join a mining poolGlossaryMining poolA group of miners who combine their computing power and share the block reward according to the work each contributes. This means even small miners receive small amounts regularly instead of a large one very rarely.On the learning path: Stage 2 · Step 3 – Criticism & risks →In the glossary →×. The pool distributes the work and pays participants according to the computing power they contribute, minus a fee. Small amounts arrive regularly instead of a large one rarely.

In the month up to 28 September 2026, Foundry USA (25.3%), AntPool (19.2%) and F2Pool (15.0%) together found around 60% of all blocks.^[8] The hardware usually belongs to the connected miners, and they can switch pools. As a rule, though, the pool operator decides which transactions go into the block. Nodes & decentralisation explains why this matters for decentralisation.

Energy – briefly put into context

Proof of work uses electricity on purpose: the cost makes attacks expensive. On 28 September 2026, the Cambridge index CBECI estimated consumption at around 153 TWh per year, with a wide range of 79 to 295 TWh.^[9] Methods, energy mix and criticism are covered in Bitcoin, energy & the environment.

Reality check: does mining at home pay off?

In Germany, practically never – because of the electricity price. According to BDEW, the German energy industry association, households have paid an average of 37.0 euro cents per kWh so far in 2026 (as of 21 August 2026).^[11]

A worked example with an assumed professional device: 200 TH/s, 3,500 watts, i.e. 84 kWh per day. At the difficulty and average block reward of 28 September 2026, it earns around 9,500 sats per day on average.^[6],[7] At an example price of $80,000 (currently: $86,292), that is around $7.60. To keep everything in one currency, we converted the euro electricity price at the ECB reference rate of 28 September 2026 (€1 = $1.1378).^[12]

Electricity price per kWh	Electricity cost per day	Result per month
42 US cents (37 euro cents, German household)	≈ $35.40	≈ −$830
10 US cents	≈ $8.40	≈ −$23
5 US cents (Cambridge index assumption for miners worldwide)[10]	≈ $4.20	≈ +$100

Own calculation for 30 days. Not included: purchase and depreciation of the device, pool fees, cooling. A higher price raises the yield; a higher difficulty and the next halving lower it. The example price is not a forecast.

In this example, the break-even point is around 9 US cents per kWh – about a fifth of the German household price, and that is before the purchase cost. If you live elsewhere, compare your own electricity price with it. People who mine at home anyway have other reasons: to understand the technology, to use the waste heat for heating or to support the network.

In Germany, mining income is generally taxable. The Federal Ministry of Finance (BMF) treats mining as a commercial activity if it is set up to be repeated and can make a profit in the long run; otherwise, as a rule, as other income. That stays tax-free only if, after deducting costs such as electricity and together with other income from services, it is below €256 a year (as of September 2026).^[13] This is not tax advice – clarify the details with a tax adviser beforehand. More in Bitcoin & tax in Germany; in other countries your local rules apply, and Bitcoin tax around Europe shows where to look.

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