Module 4 · The Bitcoin Machine / 4.5
The race to write the next page.
Hard to produce. Quick to check.
Imagine a competition in which you keep trying numbers until one produces an acceptable result. You cannot talk your way into winning. You have to do the attempts.
When you find a winner, everyone else can check it quickly. That difference between doing the work and checking the answer is the idea behind Bitcoin mining.
Change. Hash. Check.
A miner prepares a candidate block containing transactions. It hashes the block header, treating the result as a number. To pass the work requirement, that number must be at or below the target defined by the rules.
A smaller target leaves fewer acceptable results, so finding one usually takes more attempts. There is no known shortcut that lets the miner predict a winning header without doing the search.
Miners change a header field called the nonce and other parts of the candidate when necessary. Each different header gives another attempt. A nonce is simply one adjustable number; it is not a password or a signature.
The small-number model below shows the relationship. Real Bitcoin uses a vastly larger range and double SHA-256 hashing. These teaching results are predetermined, not a real mining process.
Teaching result 36 fails the target of 10. These are predetermined small numbers, not real mining odds.
Checking whether a header meets the target is cheap. Checking the whole block also requires validating its transactions and every other applicable rule. Work is necessary, but it is not a permission slip to break the rules.
More attempts mean more chances.
Hash rate is the number of hashing attempts performed per second. With otherwise equal conditions, a miner contributing a larger share of the total hash rate has a larger expected share of block discoveries.
That is a probability, not a rotation. A small miner can find the next block; a large one can have an unlucky period. Mining pools combine contributions and distribute earnings according to their own arrangements, smoothing the income individual miners would otherwise receive.
Mining began with ordinary processors, moved through graphics cards and other hardware, and became dominated by specialized chips called ASICs. Equipment, electricity, cooling, financing and operational skill all affect the business. A machine that can mine is not necessarily a machine that can mine profitably.
The target follows the pace.
Bitcoin aims for about ten minutes between blocks on average. If substantially more hash power joins while the target stays the same, blocks tend to arrive faster. If hash power leaves, they tend to arrive more slowly.
Every 2,016 blocks, the rules adjust the target using the elapsed time in the previous adjustment period. Faster-than-target production leads toward harder work; slower production leads toward easier work. Limits constrain the size of a single adjustment.
The trigger is block height, not a calendar appointment. “About two weeks” describes the intended pace, not a guarantee. Nor does an adjustment promise that the next block will arrive precisely ten minutes later.
An idealized steady state targets ten minutes on average.
The prize still has a limit.
The first transaction in a block, called the coinbase transaction, allows the miner to claim the permitted subsidy and transaction fees. Here “coinbase” names a transaction type; it does not refer to the exchange.
The subsidy is newly issued bitcoin. Fees are existing bitcoin paid by transaction senders. The subsidy halves every 210,000 blocks; the fees do not halve by that rule.
A block claiming more than the allowed total is invalid, however much work went into it. For blocks in the era beginning at height 840,000 in April 2024, the maximum subsidy is 3.125 BTC per block.
Over time the subsidy approaches zero. Mining would then depend on fees for protocol revenue. Whether future demand for block space supports an adequate security budget is a real question, not an outcome this course can promise.
The idea to keep
Mining makes block production costly while keeping a work result easy to check. Hash share affects chances, the target adjusts the expected pace, and full nodes still enforce the rules.