Block Reward

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Community Submission - Author: Caner Taçoğlu

Block reward refers to the cryptocurrency rewarded to a miner when they successfully validate a new block. The block reward is made of two components: the block subsidy and the transactions fees. The block subsidy consists of newly generated coins and represents the biggest part of a block reward. The other part is made up of all fees paid by the transactions that are included in the block.

Because the block reward is almost entirely made of the block subsidy, it is very common to see people talking about the block subsidy while referring to it as the block reward. So in popular terminology, the term “block reward” doesn’t account for the fees.

In the case of Bitcoin, the block subsidy started at 50 BTC and is being reduced in half every 210,000 blocks (approximately once every four years). Such a process is known as Bitcoin halving. Bitcoin’s block subsidy was reduced to 25 BTC in 2012, and to 12.5 BTC in 2016. The next halving is expected to occur in May 2020.

The newly generated coins are created by a special kind of transaction called coinbase transaction. Typically, the coinbase transaction is the first transaction to be added on a block, and it basically generates coins out of nothing because the coins come from a single blank input.

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