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Bitcoin Mining 101

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Bitcoin Mining 101

  • Proof-of-Work is the consensus mechanism requiring miners to perform real computational work to validate Bitcoin blocks. Miners repeatedly hash block headers until finding a value below the network target. This process is energy-intensive by design, making attacks prohibitively expensive. The cost of this work is what protects the chain: rewriting history would require redoing the work faster than the rest of the network.
  • Every 2,016 blocks (approximately two weeks), the Bitcoin network automatically recalibrates mining difficulty to maintain a 10-minute average block time. If blocks were found faster than target, difficulty increases; if slower, it decreases. The adjustment uses the actual time taken for the previous epoch versus the expected 20,160 minutes. This self-correcting mechanism ensures Bitcoin’s issuance schedule remains stable regardless of how much hashrate joins or leaves the network.
  • Hashrate measures the total computational power applied to the Bitcoin network — expressed in terahashes per second (TH/s) for a single machine, petahashes per second (PH/s) for a mining fleet or site, and exahashes per second (EH/s) for the whole network. 1 PH/s = 1,000 TH/s and 1 EH/s = 1,000 PH/s (10^18 hashes per second). Higher hashrate means more miners competing, a more secure network, and higher difficulty. Network hashrate is not reported directly: it is estimated from the difficulty and the rate at which blocks are found.
  • Miners receive a block reward for each block successfully added to the chain. This reward started at 50 BTC in 2009 and halves every 210,000 blocks (~4 years). After the April 2024 halving, the reward is 3.125 BTC per block. Each halving cuts new BTC issuance by half and with it the subsidy part of miner revenue. The next halving is at block 1,050,000, estimated around 12 Apr 2028 (BMM node), when the reward falls to 1.5625 BTC. Issuance ends around 2140, just under 21 million BTC; from then on miners earn transaction fees only.
  • Mining pools aggregate hashrate from many miners to smooth out revenue variance. The dominant payout method is Full Pay Per Share (FPPS), which pays miners for every valid share submitted — including an estimated share of transaction fees — regardless of whether the pool finds a block. PPS+ is similar but uses actual rather than estimated fees. PPLNS (Pay Per Last N Shares) is proportional and luck-dependent. Pool fees typically range from 0% to 4%. Pool choice affects both predictability of income and the decentralisation of Bitcoin block production.
  • Stratum V2 is the next-generation mining communication protocol replacing the decade-old Stratum V1. Its key advancement is Job Declaration — miners can independently select which transactions to include in a block, rather than accepting the pool’s selection. This significantly improves Bitcoin’s decentralisation and censorship resistance. V2 also adds encrypted communication, reduced bandwidth, and improved efficiency. Stratum V2 represents a structural shift in the relationship between miners and pools.
  • The breakeven BTC price is the minimum price at which mining revenue covers electricity costs. It is calculated as: (power consumption in kW × 24h × energy tariff in USD/kWh) ÷ daily BTC mined. Illustration (rounded figures, not current data): an Antminer S21 (200 TH/s, 17.5 J/TH) consumes 3.5 kW (200 × 17.5 ÷ 1000). At $0.055/kWh that costs $4.62/day. If the miner earns about 0.00000050 BTC/TH/day (roughly the level at 900 EH/s network hashrate), that is 0.00010 BTC/day, and the breakeven BTC price is $4.62 ÷ 0.00010 = ~$46,200 — before hardware depreciation and hosting fees. Current figures: Hashrate Calculator.

Mining Pools

Top 3 by share of blocks found over the last 30 complete days; current ranking on the BMM Dashboard: Bitcoin network page.

Hardware Producers

All models in BMM's directory: Calculator → ASIC Miner Selection.

Useful Links