Bitcoin mining is the critical process that secures the Bitcoin network and introduces new coins into circulation. But how is the work of miners actually calculated and rewarded? The answer lies in a combination of cryptography, competition, and a clever, self-adjusting system.

At its core, Bitcoin mining involves computers racing to solve an extremely complex cryptographic puzzle. This puzzle is based on the SHA-256 hash algorithm. Miners bundle pending transactions into a block and then repeatedly hash this block's data along with a random number called a nonce. Their goal is to produce a hash that meets a specific, demanding target set by the network.

This target is what determines mining difficulty. The hash target is a number that a new block's hash must be below. It is represented by the "difficulty" setting, which adjusts approximately every two weeks (or every 2016 blocks). The calculation for this is governed by a simple principle: the Bitcoin protocol aims to maintain an average block time of 10 minutes. If blocks are being found too quickly because more mining power joins the network, the difficulty increases, making the target harder to hit. If mining power drops, the difficulty decreases.

The primary metric for calculating mining power is hash rate. Hash rate measures how many of these cryptographic calculations a miner or the entire network can perform per second. It is expressed in units like terahashes per second (TH/s) or exahashes per second (EH/s). A higher hash rate means a miner has a greater probability of solving the puzzle and earning the block reward.

The probability for a miner to find the next block is roughly calculated as: the miner's hash rate divided by the total network hash rate. For instance, if a miner controls 1% of the total network hash rate, they can statistically expect to mine 1% of all blocks over time.

The reward calculation is straightforward but powerful. The miner who successfully mines a new block receives two types of rewards: the block subsidy and the transaction fees. The block subsidy started at 50 BTC per block and undergoes a "halving" approximately every four years, cutting the reward in half. This is currently 3.125 BTC per block. Additionally, the miner collects all the fees attached to the transactions included in their block. This reward is the incentive that drives the entire mining ecosystem.

Ultimately, Bitcoin mining calculation is not about solving a meaningful problem but rather about performing trillions of guesses per second in a massive, decentralized lottery. The difficulty adjustment ensures this lottery consistently produces a winner about every ten minutes, regardless of how much total computing power is involved. This elegant system of calculations is what makes Bitcoin a predictable, secure, and decentralized digital currency, as it ties the creation of new money directly to the work of securing the transaction ledger.