💡 Tip: The following article data is for reference only. Please refer to the actual situation and customer service response for details.
Bitcoin transactions are processed through a decentralized public ledger called the blockchain. Miners use specialized hardware to group new transactions into blocks. They compete to solve complex mathematical puzzles (known as Proof of Work) through Solo Miner to secure the blocks and validate transactions. The first to solve the puzzle adds the block to the blockchain, thereby securing the network and receiving a reward. The core of this process is passing your digital coins to the next person through an encrypted relay. It's somewhat like an encrypted game of "hot potato"! After you initiate a transfer, the information is split into 256-bit SHA-256 encrypted data blocks (each about 64KB), which are then propagated across the Bitcoin network's 15,000+ nodes. On average, 1,500-2,000 transactions are packaged into a new block every 10 minutes.
Initiate/Create Transaction✍️
Creating a Bitcoin transaction essentially means sealing your digital coins with an encrypted stamp. Imagine writing a shipping label for a bag of encrypted gold coins: you not only need to specify "to whom," but also sign it with your 256-bit private key, a process so complex that even quantum computers would struggle.
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Input Section: The Bitcoin you spend must come from previous transaction outputs, just like cashing a check requires the original check.
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Output Section: Specifies the recipient's Bitcoin address (that 34-character string starting with 1 or 3).
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Transaction Fee: Typically 0.00001-0.0001 BTC (approximately $0.7-7), a tip for miners that determines processing speed.
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Data Size: A standard transaction is about 250 bytes, while multi-signature transactions can exceed 500 bytes.
⚠️ Security Warning! Never create transactions on an unsecured network! According to the Bitcoin Core Q3 2024 report, transactions signed with hardware wallets reduce the risk of malicious tampering by 99.7%. The U.S. National Institute of Standards and Technology (NIST) 2024 cryptographic protocol guidelines particularly emphasize that the probability of transaction data packets being intercepted on unencrypted WiFi is as high as 87%.
In January-February 2026, according to information statistics from the TinyChipHub laboratory, global virtual currency fraud and hacking incidents were frequent, resulting in total losses exceeding 600 million. In January, a single major hardware wallet phishing case caused total losses of approximately 400 million; losses in February decreased but still reached about $228 million. There were over 30 publicly recorded security incidents in these two months. Fraud techniques heavily relied on social engineering and AI forgery, with targeted phishing against individual investors replacing technical vulnerabilities as the primary threat.
Recently, in March, the U.S. Department of Justice recovered 61 million USDT involved in the "pig butchering" scams from early in the year. Australia saw a AUD 5 million investment scam targeting the elderly. In Dubai, scammers posing as buyers stole cryptocurrencies worth millions of dirhams and disappeared. Meanwhile, South Korea experienced fraud involving AI trading hype, involving 19 billion Korean won. These cases show that virtual currency fraud groups are active, but law enforcement agencies worldwide are also enhancing cross-border cooperation, bringing enforcement to a new level.
Select Mempool⏳
The core of Bitcoin is the memory pool (mempool), a decentralized database that stores all unconfirmed transactions waiting to be added to a Bitcoin blockchain block. Strictly speaking, the mempool is the Bitcoin network's waiting room, where all pending transactions queue up. Now imagine over 46,000 transactions globally simultaneously raising their hands and shouting "Pick me! Pick me!" while nodes act as auditors with one task: verification! These unconfirmed transactions wait in the "mempool," and nodes verify whether the sender has sufficient funds and the correct digital signature.
After a transaction is created, it is first signed by the sender's wallet and then broadcast to the network. Nodes receive the transaction and verify its validity, ensuring the sender has sufficient balance and the transaction format is correct. Once verified, the transaction is placed into each node's mempool. It's important to note that the time a transaction stays in the mempool varies depending on network conditions and associated fees. If a transaction is not confirmed in time, it may eventually be removed from the mempool.
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The transaction is signed by the sender's wallet and broadcast to the network.
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Nodes verify whether the transaction's balance and format are correct.
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Valid transactions are stored in each node's mempool.
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The stay time in the mempool varies with network conditions.
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If the fee is insufficient, unconfirmed transactions may be canceled.
| Fee Range | Estimated Confirmation Time | Applicable Scenarios |
|---|---|---|
| 50+ sat/vByte | Next block (~10 min) | Urgent transfers, exchange deposits |
| 10–50 sat/vByte | 1–3 blocks (10–30 min) | Daily transfers, normal level |
| 1–10 sat/vByte | Several hours to half a day | Small, non-urgent transfers |
| <1 sat/vByte | Over 24 hours or even discarded | ❄️ Basically like throwing it into the sea |
❄️ Fun Fact: The default mempool expiration time in Bitcoin Core is actually 336 hours (14 days), with a pool capacity limit of 300MB. When transaction influx fills the mempool, a fee-based eviction mechanism kicks in, prioritizing the removal of transactions with the lowest fee rate. Here's a reminder: during congestion, transactions with fees below 5-10 sat/vB (satoshis per virtual byte) are easily kicked out of the mempool by nodes!
⚒️ Package & Hash
After miners select transactions from the Mempool, the next task is to "package them into a block." Each block can hold a maximum of 2000–3000 transactions (depending on transaction size). All transactions are organized using a Merkle Tree structure, ultimately compressed into a 32-byte Merkle Root, which is placed into the block header.
- Sort transactions from the Mempool by fee rate, prioritizing high-fee transactions for packaging.
- Hash all transaction TXIDs pairwise to generate the Merkle Tree.
- Calculate the Merkle Root (32 bytes) and write it into the block header.
- The block header includes: version number + previous block hash + Merkle Root + timestamp + difficulty target + Nonce.
- Prepare to start brute-force hashing, entering the PoW stage.
The hashing algorithm used is SHA-256, which outputs a fixed 256 bits (32 bytes). This algorithm is certified by NIST FIPS 180-4 and is recognized as one of the most secure hash standards in cryptography. Changing even 1 byte of any transaction completely alters the Merkle Root, and consequently the block hash, which is the core of tamper resistance.
- ⚡ SHA-256 output: 256 bits = 32 bytes, fixed length regardless of input size.
- ⚡ Merkle Root size: constant 32 bytes, does not increase with the number of transactions.
- ⚡ Single block capacity: 2000–3000 transactions (theoretical limit about 4MB weight after SegWit).
❓ Did you know: SHA-256 is actually executed twice in Bitcoin (double SHA-256), further reducing the risk of collision attacks and length extension attacks. It may seem redundant, but it was a deliberate defensive design by Satoshi Nakamoto.
⛏️ Proof of Work (PoW)
This is the most "mind-burning" part of the entire Bitcoin system. The core logic of PoW (Proof of Work) is that miners continuously perform SHA-256 double-hashing on the block header data, adjusting the Nonce value, until a hash result is found that meets the condition: having enough leading zeros. The current network requires a valid hash probability of about 1/2¹⁹ ≈ 1/524,288, multiplied by global competition, making the difficulty可想而知.
| Miner Model | Hash Rate | Release Year | Probability of Solo Block (Reference: 600 EH/s Network) |
|---|---|---|---|
| Bitmain S9 | 14 TH/s | 2017 | 0.0000023% |
| Canaan A1246 | 90 TH/s | 2021 | 0.000015% |
| Antminer S21 Pro | 234 TH/s | 2024 | 0.000039% |
The difficulty adjusts automatically every 2016 blocks (approximately 14 days), aiming to maintain an average block time of 10 minutes. By the end of 2024, the global hash rate exceeded 600 EH/s, thousands of times higher than the 2017 network, and the difficulty has risen accordingly.
- 🏃 Difficulty adjustment cycle: every 2016 blocks ≈ 14 days.
- 🏃 Previous global hash rate reference: 600+ EH/s (600 quintillion hashes per second).
- 🏃 Valid hash leading zeros requirement: 19 or more (varies in real-time with difficulty).
To participate in mining at home, the most realistic approach is to connect a Mini Crypto Miner with suitable hash rate to a mining pool. Going solo with a single machine against the entire network's 600 EH/s is like a cyber extreme challenge! 🔥 Nonce is a 32-bit field in the block header, theoretically offering about 4.2 billion possibilities. When the Nonce is exhausted without finding a valid hash, miners change the Extra Nonce in the Coinbase transaction or the timestamp, generating a new hash space to continue searching.
✅ Verification => Ledger Update
After a miner finds a valid Nonce and mines a new block, it is immediately broadcast to the entire network. Other nodes, upon receiving the block, first perform strict verification rather than applause. Each full node independently checks whether the block header hash meets the current difficulty, whether all transactions are valid, and if there is any double-spending. Currently, at least 15,000–17,000 full nodes are operating globally, each an independent gatekeeper. After a transaction is packaged into a block, it is not yet "set in stone." Industry practice is to wait for 6 confirmations, meaning six additional blocks are added after the current block, taking about 60 minutes. Each additional confirmation exponentially increases the workload an attacker would need to redo, making double-spending attacks practically infeasible due to cost.
- Nodes verify that the block header hash value satisfies the current difficulty target.
- Verify that all transaction input UTXOs actually exist and are unspent.
- Verify the ECDSA signature of each transaction is valid.
- Verify that the block height is written into the Coinbase transaction.
- If verification passes, add the block to the local blockchain and update the UTXO set.
Coinbase Pro (2022) upgraded BTC deposit confirmations to 6 confirmations, previously it was 3. The reason is the rapid growth of network hash rate, requiring a more conservative strategy against reorganization risks! After all, if an exchange is double-spent, the losses are not small. BIP34 requires the block height to be written into the Coinbase transaction, effectively preventing cross-height block reuse attacks. If two miners almost simultaneously mine valid blocks, a temporary fork occurs. Eventually, the chain with the greater cumulative work becomes the "correct" chain, and the other block automatically becomes an "orphan block," with its transactions returning to the Mempool to wait for repackaging.
🏆 Block Reward
Finally, we reach the most thrilling part. The successful miner receives revenue: the block reward, and of course, all transaction fees from the packaged transactions are already included. The block reward halves every 210,000 blocks (approximately 4 years), known as the "Halving" mechanism.
| Halving Count | Year | Block Reward | Approximate Total Mined BTC |
|---|---|---|---|
| Genesis | 2009 | 50 BTC | 0 |
| 1st | 2012 | 25 BTC | ~10.5 million |
| 2nd | 2016 | 12.5 BTC | ~15.75 million |
| 3rd | 2020 | 6.25 BTC | ~18.38 million |
| 4th | 2024 | 3.125 BTC | ~19.69 million |
Bitcoin's total supply is hard-capped at 21 million coins, enforced by code. BIP42 fixed a bug in early code that could have caused supply overflow, ensuring the total cap is absolutely reliable. For mining pool participation, miners need to pay 1%–3% pool fees, with the remainder distributed based on hash rate contribution.
- 🏆 Post-2024 halving block reward: 3.125 BTC/block.
- 🏆 BTC total supply cap: 21,000,000 coins.
- 🏆 Mining pool fees: typically 1%–3%, relatively lower for larger pools.
F2Pool (on the 2024 halving day), as a global top mining pool, controlled about 13% of the network's hash rate that day. On the halving day, transaction fees surged, with fee income alone largely compensating for the reduced block reward. This explains why miners care not only about hash rate efficiency but also about fee opportunities from network congestion. If you're interested in home mining and want to experience being an "end participant" in this complete process firsthand, check out these Small Miners products, starting with the Bitaxe Ultra to understand from the hardware level how the PoW mechanism actually operates. After all, reading an article is one thing; having a machine actually run the SHA-256 algorithm feels entirely different.
