⛏️ Mining & Proof-of-Work
The engine of consensus and unforgeable costliness
What is Mining?
Mining is the process of using computational power to validate transactions and create new blocks. Miners compete to solve a cryptographic puzzle—the winner adds the next block and earns the reward.
The 10-Minute Lottery
Every ~10 minutes, miners worldwide compete. The winner receives newly minted Bitcoin plus all transaction fees in that block.
Current reward: 3.125 BTC (~$200,000+)
🔐 Proof-of-Work Explained
Miners must find a number (nonce) that, when combined with block data and hashed, produces a result below the target difficulty.
📊 Difficulty Adjustment
Every 2,016 blocks (~2 weeks), Bitcoin automatically adjusts the puzzle difficulty to maintain the 10-minute average.
More Miners Join
Blocks come faster → Difficulty increases → Back to 10 minutes
Miners Leave
Blocks slow down → Difficulty decreases → Back to 10 minutes
This self-regulating mechanism ensures predictable issuance regardless of how much computing power joins or leaves the network.
⚡ The Halving
Every 210,000 blocks (~4 years), the block reward is cut in half. This creates increasing scarcity over time.
🏛️ Austrian Economics: Unforgeable Costliness
"What desirable property should the money commodity have? It should be costly to produce." — Nick Szabo
Gold is valuable partly because extracting it requires real resources. Bitcoin's Proof-of-Work creates unforgeable costliness—you cannot fake the energy expenditure needed to mine Bitcoin.
Bitcoin converts electrical energy into monetary security. This creates a physical anchor between the digital realm and real-world resources.
🌍 Energy & Environment
Bitcoin mining is often criticized for energy use. Here's the nuanced reality:
Energy Seeking
Miners seek the cheapest energy—often stranded renewables or wasted flare gas that would otherwise be unused.
Security Cost
The energy secures a $1+ trillion network. Banks, gold mining, and traditional finance also consume massive resources.
🏊 Mining Pools
Solo mining is like buying one lottery ticket. Pools combine hash power and share rewards proportionally.
Thousands of miners contribute hash power. When the pool finds a block, rewards are distributed based on each miner's contribution. Smaller, steadier income vs. rare large payouts.
📝 Check Your Understanding
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