In the last lesson you met Bitcoin itself — a fixed-supply money with no central issuer, living on a public, append-only ledger. But a ledger that nobody updates is just a dusty notebook. Bitcoin’s notebook is alive: roughly every ten minutes a fresh page gets added, full of new payments. Who writes that page? Who decides which payments make the cut? And why on earth would anyone volunteer to do the work? That’s the story of mining — the engine that grows the chain — and by the end of this lesson you’ll know exactly what miners do, what’s inside the pages they write, who pays them, and how the network keeps the whole thing ticking at a steady pace.
The Mempool: A Waiting Room for Payments
Before you read — take a guess
Guess before reading: when you send a Bitcoin payment, what happens to it in the first few seconds?
When you send bitcoin, your payment doesn’t teleport straight into the ledger. First it’s broadcast out across the network, where it lands in a kind of waiting room called the mempool (short for memory pool). The mempool is simply the pile of transactions that have been announced but not yet confirmed — they’re valid and signed, but no block has scooped them up yet.
Think of it like a post office at closing time. Letters keep dropping into the bin all day (transactions broadcast to the network). They’re real letters with real addresses, but they haven’t gone anywhere yet. Every so often a courier comes by, grabs an armful, and sends them off together. The mempool is that bin; the courier is a miner; the armful they grab becomes the next block.
Miners don’t have to take every waiting transaction, and there’s usually more in the bin than fits in one armful. So they choose — and they tend to grab the ones offering the highest fee first, because the fee is part of their pay (we’ll dig into how fees are set in the transactions lesson). For now, the headline is simple: broadcast → mempool → wait → picked into a block.
“Unconfirmed” has a precise meaning
A transaction sitting in the mempool is unconfirmed — it might still be dropped, replaced, or simply outbid by others. It only becomes confirmed once a miner includes it in a block that gets added to the chain. Until then, treating it as final money is a rookie mistake.
A transaction is sitting in the mempool. Which statement is accurate?
What Miners Actually Do
Before you read — take a guess
Before reading: what is a miner's core job?
Here’s the single most important thing to get straight, because it’s the source of endless confusion: mining is the act of proposing the next block. A miner does roughly this:
- Scoops transactions out of the mempool — usually the highest-fee ones — into a candidate block.
- Adds one special transaction of their own, called the coinbase transaction, which pays the miner (more on this below). It’s always the first transaction in the block.
- Competes with every other miner on the planet for the right to be the one who appends this block to the chain. Whoever wins gets their block added; everyone else throws their candidate away and starts fresh on the next one.
That “competes” step is the heart of Bitcoin, and it’s deliberately the one piece we’re saving for next lesson. The mechanism that decides the winner is called proof-of-work, and it’s a genuinely clever contest. For today, just hold the shape of it: many miners race, exactly one wins per block, the winner writes the page and gets paid.
Myth: “Miners create the transactions”
They don’t. Users create and sign their own transactions — that signature is what proves you own the coins you’re spending. Miners only select, order, and include transactions that already exist in the mempool. A miner can choose to ignore your payment, but they can never forge it, redirect it, or pay from your wallet. The one transaction a miner does author is the coinbase, which pays themselves their reward.
Real but limited power: a miner decides which waiting transactions go into their candidate block and what order they appear in. They can prioritize high fees, or even refuse to include a particular transaction. What they cannot do is change the amounts, the senders, or the recipients — those are locked by the user’s cryptographic signature. So miners are gatekeepers of inclusion and ordering, not authors of payments.
Inside a Block
Before you read — take a guess
Guess: a Bitcoin block is split into two main parts. What are they?
A block isn’t a shapeless blob of payments. It has two parts: a small header and the body (the list of transactions). The header is the block’s identity card — a compact bundle of fields that the rest of the network reads at a glance:
| Header field | What it is |
|---|---|
| Previous block’s hash | The fingerprint of the block before it — this is the link that forms the chain. |
| Merkle root | A single fingerprint that summarizes all the transactions in the block. |
| Timestamp | Roughly when the block was assembled. |
| Nonce | A number miners tweak while competing (its role is the proof-of-work story, next lesson). |
| Difficulty target | How hard the winning contest currently is (more on this below). |
The Merkle root deserves a moment, because it’s quietly brilliant. All the transactions in the block get hashed together, in pairs, again and again, until they collapse into one final fingerprint — the Merkle root — which gets stamped into the header. The payoff: anyone can prove a specific transaction is in a block without downloading the whole block. You only need that one transaction plus a short trail of fingerprints leading up to the root. For a phone wallet that can’t store hundreds of gigabytes, that’s the difference between “works” and “doesn’t.”
The header is the part that gets chained
Notice the previous block’s hash lives in the header. That’s exactly the linking trick from crypto-basics: each block points back at the one before it, so editing an old block breaks every link after it. The header is small on purpose — it’s the part the network fingerprints and links together, while the bulky transaction list hangs off the Merkle root.
Sort each item by where it lives: in the block header, in the transaction list (body), or whether it describes the network as a whole.
Place each item in the right group.
- Alice's signed payment to Bob
- The total hashrate of all miners combined
- The Merkle root
- The coinbase transaction paying the miner
- The difficulty target
- The previous block's hash
Now revisit the linked-chain idea from crypto-basics with Bitcoin’s blocks in mind. Tamper with an early block below and watch the break cascade through every block built on top of it — then re-mine to repair the chain. That re-mining is, in miniature, the work miners do to propose valid blocks:
Chain valid — every block matches the one before it.
A block stores a fingerprint of its own contents and a copy of the previous block’s fingerprint. Change one block and its fingerprint shifts, so the next block’s stored copy no longer matches — and the break cascades down the whole chain.
What does the Merkle root in a block header let you do?
The Block Reward: Why Anyone Bothers
Before you read — take a guess
Before reading: why would a miner spend real money on electricity and hardware to add a block?
Mining is expensive — real hardware, real electricity. Nobody does it for fun. The block reward is the paycheck, and it has two pieces:
| Part of the reward | Where it comes from | Notes |
|---|---|---|
| Block subsidy | Brand-new bitcoin, minted in the coinbase transaction | This is the only way new coins enter circulation. |
| Transaction fees | The fees attached to every transaction the miner included | Paid by users; the more (and higher-fee) transactions, the bigger this slice. |
So the block reward = subsidy + fees. The subsidy is genuinely new money — it’s created out of nothing by the coinbase transaction, which is why miners always put it first in the block. This is the answer to “where do new bitcoins come from?”: not from a mint or a treasury, but from each new block’s coinbase, on a fixed, public schedule that everyone can verify.
Myth: “New coins appear by magic / from nowhere”
New bitcoin isn’t conjured arbitrarily — it’s issued on a strict schedule through the coinbase transaction of each block, and only the miner who legitimately wins the block can claim it. The amount is fixed by the network’s rules, not chosen by the miner. And that subsidy isn’t forever: it halves at regular intervals (every 210,000 blocks, roughly every four years), shrinking the new-coin flow over time. We’ll trace the full halving schedule and the 21-million-coin cap in the supply lesson.
Why this *is* the security model
The block reward isn’t just a perk — it’s the reason Bitcoin is hard to attack. To rewrite history a cheater would have to out-compete every honest miner, all of whom are racing because there’s money in it. The reward ties block creation to a real, ongoing cost, which makes the chain expensive to forge. How that cost is enforced is the proof-of-work story — next lesson.
Fill in the blanks about the block reward.
Pick the right option for each blank, then check.
The block reward paid to the winning miner is made of two parts: the block , which is newly minted bitcoin created in the transaction, plus the transaction of every payment included. The subsidy is the only source of entering circulation, and it on a fixed schedule.
Quick callback to lesson 1 — make sure the issuance picture lines up with the bigger story:
In lesson 1 you learned Bitcoin has no central issuer and a capped supply. How does that square with miners minting new coins?
Keeping the 10-Minute Clock: Difficulty
Before you read — take a guess
Guess: Bitcoin aims for a new block about every ten minutes. As more miners join and the network gets more powerful, what keeps that pace from speeding up?
Bitcoin aims to add a new block about every ten minutes on average. Note on average: it’s a target, not a metronome. Real blocks vary a lot — some arrive a minute apart, others forty minutes later. Over the long run, though, the average hugs ten minutes. Why ten? It’s a deliberate trade-off: long enough for blocks to spread across the global network before the next one appears, short enough that payments confirm in a reasonable time.
But here’s the puzzle. The winning contest gets easier to win the more total computing power — called hashrate — is racing. If mountains of new miners plug in, blocks would start popping out every five minutes, then every two. So Bitcoin has an automatic governor: the difficulty adjustment, or retarget.
Every 2016 blocks — roughly every two weeks — the network looks at how long those blocks actually took and recalibrates:
- Blocks came faster than ten minutes on average (lots of hashrate joined)? → Difficulty rises, making the contest harder, slowing the pace back toward ten minutes.
- Blocks came slower (miners left, hashrate dropped)? → Difficulty falls, making the contest easier, speeding the pace back up.
The genius is that this happens automatically, by rule, with no committee and no vote. No matter how much mining power floods in or storms out, the 2016-block retarget keeps blocks landing at roughly ten-minute intervals — the heartbeat stays steady.
Myth: “Blocks come exactly every ten minutes”
Ten minutes is a statistical average, not a clock. Individual blocks scatter widely — you might see two in three minutes, then nothing for half an hour. The difficulty retarget only steers the long-run average back to ten minutes; it can’t make any single block punctual.
Connect each term to its correct description.
Pick a term, then click its definition.
Select EVERY statement that is true about Bitcoin's difficulty adjustment. (More than one is correct.)
The Big Picture
Five moving parts, one growing ledger. Payments wait in the mempool; a miner scoops them into a candidate block with a coinbase transaction that pays them; the block has a compact header (previous hash, Merkle root, timestamp, nonce, difficulty) plus the transaction list; the winner collects the block reward (subsidy + fees); and the difficulty retarget every 2016 blocks keeps new blocks arriving about every ten minutes. Chunk it into one picture:
Big picture
The ledger and mining
- The ledger and mining
- Pending payments
- Mempool — broadcast, unconfirmed transactions waiting
- Users create & sign their own payments
- Miners pick from it (high fees first)
- Mining = proposing a block
- Assemble a candidate block from the mempool
- Add the coinbase transaction (pays the miner)
- Compete to append it — winner takes all
- How the winner is chosen = proof-of-work (next)
- Inside a block
- Header — prev hash, Merkle root, timestamp, nonce, target
- Body — the list of transactions
- Merkle root proves a tx is included without the full block
- Reward & pace
- Block reward = subsidy + fees
- Subsidy = new coins, halves every 210,000 blocks
- Difficulty retargets every 2016 blocks (~2 weeks)
- Keeps blocks near ten minutes on average
- Pending payments
A mixed recap — it pulls from everything above:
What is the mempool?
Check your answer to continue.
Key Takeaways
What to remember
- The mempool is the waiting room. Broadcast transactions sit there unconfirmed until a miner selects them — usually highest-fee first — for the next block. In the mempool ≠ in a block.
- Mining means proposing the next block. A miner batches mempool transactions into a candidate block, adds a coinbase transaction that pays themselves, and competes to append it. The winner writes the page; everyone else starts over.
- Users author payments, not miners. You create and sign your own transactions; miners only select and order them. They can ignore a payment but never forge, redirect, or alter one.
- A block = header + transaction list. The header holds the previous block’s hash (the chain link), a Merkle root (one fingerprint for all transactions), a timestamp, a nonce, and the difficulty target. The Merkle root lets anyone prove a transaction is in a block without downloading the whole thing.
- Block reward = subsidy + fees. The subsidy is newly minted bitcoin from the coinbase — the only source of new coins — and it halves on a fixed schedule (every 210,000 blocks). Fees come from the included transactions. This reward is what pays for security.
- Difficulty retargets every 2016 blocks (~2 weeks) so blocks keep arriving about every ten minutes on average, no matter how much hashrate joins or leaves. More miners → difficulty rises; fewer → it falls.
- Myths busted: miners don’t create transactions, mining isn’t useful science, blocks aren’t punctual (it’s an average), and new coins aren’t magic — they’re scheduled coinbase issuance that halves over time.
You now know who writes each page, what’s on it, and why they bother. But we kept dodging the most important word: compete. How exactly does one miner win the right to add a block? That contest is proof-of-work — a deliberately hard guessing game that ties the whole system to real-world cost — and it’s exactly where we head next.