How Does Bitcoin Mining Work? Hash Rate, Difficulty and the 3.125 BTC Block Reward Explained

Mining is bookkeeping with a lottery attached
Bitcoin mining sounds like digging for coins, but the work is really bookkeeping secured by a lottery. Specialised computers called ASICs gather pending transactions, bundle them into a block, and then hash the block header billions of times per second until the result falls below a target number set by the network. The first miner to find such a hash adds the block to the chain and collects the reward. That single process does two jobs at once: it issues new bitcoin into circulation, and it makes the transaction history expensive to rewrite, because rewriting history would mean redoing all that guessing work. There are no equations to solve in the school sense — only trial and error, repeated at enormous speed. A miner builds a candidate block, picks unconfirmed transactions from the mempool (usually those paying the most fee per unit of size), puts a special coinbase transaction first that pays the reward to itself, and compresses all the transactions into a Merkle tree with a single root hash. It then hashes an 80-byte header containing the version, the previous block's hash, the Merkle root, a timestamp, the encoded target and a free field called the nonce, changing the nonce again and again until the hash is low enough.

Where the reward comes from: subsidy plus fees
A miner's reward has two parts. The first is the block subsidy: bitcoin that did not exist before this block, created by the protocol itself. The Bitcoin white paper describes the first transaction in a block as a special transaction that starts a new coin owned by the creator of the block, and compares the process to gold miners expending resources to add gold to circulation. The second part is transaction fees: for every transaction, the difference between its inputs and outputs, which the miner is entitled to claim. The subsidy halves every 210,000 blocks, an event known as the halving. Since April 2024 it has been 3.125 BTC per block, down from 50 BTC at launch, then 25, 12.5 and 6.25 BTC at successive halvings. At roughly 144 blocks a day, that is about 450 new BTC per day. The next halving is expected around April 2028, at block 1,050,000, when the subsidy falls to 1.5625 BTC. The halving does not change the 21 million supply cap; it changes the speed of arriving there, with issuance ending around 2140. As the subsidy shrinks, fees are meant to carry more of the incentive to secure the network — a transition that is still playing out, since fees have recently added well under 1% on top of the subsidy in many blocks. On November 1, 2026, for example, block 974,157 paid its miner 3.141 BTC in total, of which fees were just 0.016 BTC.

Hash rate and difficulty: the network's thermostat
Two numbers describe how hard mining is at any moment. Hash rate is the total guessing power of the network, measured in hashes per second — recently around 1,000 exahashes per second (EH/s), with trackers putting it near 1,069 EH/s on November 1, 2026. Difficulty is the network's thermostat: a number that expresses how small the target is, and therefore how many guesses a miner needs on average to find a valid block. Nobody edits difficulty by hand. Every full node runs the same rule: every 2,016 blocks, the network checks how long that group took to mine, compares it with two weeks (2,016 blocks at ten minutes each), and sets a new target. If miners joined and blocks came too fast, difficulty rises; if miners switched off and blocks slowed, difficulty falls at the next retarget. That is why "every two weeks" is only a rough estimate — the reset follows a block count, not a calendar. Recent trackers put difficulty around 148.36 trillion, with a retarget due around November 12, after an October retarget near 132.72 trillion. The practical lesson is simple: a miner with unchanged hardware earns a smaller share of rewards when difficulty climbs, because the same machine is now competing against more total guessing power. Cheap power and efficient machines are what separate survivors from shutdowns when margins thin.

Why miners join pools, and what it costs to run one
Because finding a block solo is a lottery with very long odds for a single machine, most miners join pools. A pool combines many miners' hash rate, finds blocks far more regularly, and splits the rewards in proportion to each miner's contributed work. That smooths income from a rare jackpot into a steadier stream, at the cost of a pool fee and reliance on the pool operator. For a beginner, the honest version of mining economics runs through one metric: hashprice, the revenue a miner earns per unit of computing power per day, usually quoted in dollars per petahash per second per day. Hashprice folds four variables into one number — the bitcoin price, the block subsidy, total network competition, and fee income. During 2026 it has traded roughly between $29 and $40 per petahash per day, against about $70 in 2020, which is why the industry has redirected billions of dollars of power capacity toward artificial-intelligence workloads in the last two years. Mining revenue per unit of power has fallen sharply since the April 2024 halving, and that squeeze is the story of modern mining: efficient hardware, cheap electricity, and scale decide who stays on, while marginal rigs go dark first when revenue falls below power cost. When rigs switch off, hash rate falls, difficulty follows downward at a later retarget, and the system finds a new balance — the network breathes, and difficulty chases it.

What mining does not do
Three misconceptions are worth clearing up. First, mining does not create bitcoin out of thin air on demand: issuance follows the fixed halving schedule, and no miner can mint extra coins beyond the subsidy plus fees in a valid block. Second, a higher difficulty does not mean higher earnings — it means more competition for the same fixed reward, so each unit of hash earns less. Third, a halving does not guarantee a higher price. It cuts the new supply drip in half, but price moves only if demand overwhelms that smaller drip; the calendar date alone guarantees nothing. Mining is also not the same as buying bitcoin: a miner takes on hardware, power, cooling, maintenance and obsolescence risk, and the machine that is profitable today may be unprofitable after the next difficulty rise or price fall. For most readers, understanding mining matters not because they will run a rig, but because it explains Bitcoin's security model: the chain is trustworthy not because anyone promises it, but because rewriting it would cost more guessing work than anyone can afford to redo. That is the point of proof of work — security bought with real-world energy, checked by every node, and paid for, block by block, in subsidy and fees.

FAQ
What does a Bitcoin miner actually do? It bundles pending transactions into a block and hashes the block header billions of times per second until the hash falls below the network target.
How much is the block reward now? 3.125 BTC in new subsidy per block since the April 2024 halving, plus the transaction fees in that block.
What is hash rate? The network's total guessing power, recently around 1,000 EH/s; difficulty is the target adjustment that keeps blocks near ten minutes apart.
How often does difficulty change? Every 2,016 blocks, based on how long the previous group took against a two-week benchmark.
When is the next halving? Expected around April 2028, at block 1,050,000, when the subsidy falls to 1.5625 BTC.
Does a halving guarantee a higher price? No — it halves new supply, but price depends on demand overwhelming that smaller drip.

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This article is market news and general information only, not financial advice.