Mining Lab · Coinovo Academy · How mining works
Guessing until it fits
Miners look for a number that, together with the block contents, yields a fingerprint below a threshold. That number is called the nonce. There is no way to work it out: you try, billions of times a second, until a result is small enough.
The effort is the point. Anyone who wants to append a block must have spent work that cannot be short-cut. Anyone who wanted to forge history would have to redo that work for every block after it, faster than the rest of the world.
The name for this is proof of work.
The first with a matching number appends the next block and gets two things for it: the block reward in newly created coins, and all the fees of the payments in that block.
The network aims for one block every ten minutes. Sometimes it takes two minutes, sometimes forty. It is a random process: every attempt has the same small chance, no matter how long the search has been running.
That is around 144 blocks a day.
The guessing runs on special machines that can do nothing but this one step. Their power consumption is the real stake. Whether it pays off depends on three numbers: the efficiency of the machine, the price of electricity and the yield per unit of computing power.
Efficiency is measured in joules per terahash. A good machine today sits at 12 to 18, an older one at 30 and above. That sounds like a small difference and is a factor of two to three on the electricity bill.
The power price decides alongside it. In Hungary the household tariff is around 9 cents a kilowatt hour, in Germany around 44, in Austria around 37. The same machine is therefore viable in one country and subsidised in another, without anything about it changing.
The yield per terahash is the third, and the only one nobody controls: it follows from the price, the reward and the size of the whole network. Historically it falls, because the network grows faster than the price.
Four items are regularly missing from manufacturers' example calculations. The machine does not run 100 percent of the time but more like 95 to 98. Power supplies and fans fail. The pool keeps one or two percent. And the difficulty keeps rising during the machine's life.
Each of those costs a few percent; together they easily come to twenty. A calculation that works out at plus five percent does not actually work out.
So the figure to rely on is not the profit but the break-even power price: the price up to which the machine carries itself at all. If your own tariff is well below it, the sums survive a few unpleasant surprises.
It does not decide which payments are valid, the nodes check that. It cannot create coins out of nothing beyond the reward. A block that breaks the rules is rejected by the network, and the work was for nothing.
Tasks, shifts and the daily hunt, plus an account that shows what has added up.
Opens straight away. No account, nothing to install.