Block Reward

A block reward is a subsidy that was programmed by the creator of bitcoin to reward transaction processing nodes for securing the network in its infancy. The reward is earned by the miner who successfully solves the cryptographic puzzle and adds the latest block to the chain.

The first block reward was 50 bitcoins. Every 210,000 blocks (roughly 4 years), the block reward diminishes by 50% in an event commonly called “the halvening” so as to encourage miners to shift from working for subsidies and toward working for transaction fees. The reason for that is to incentivize miners to invest in businesses and do the necessary research and development to efficiently grow the circulation of bitcoin transactions.

If the total value of transaction fees does not out-pace the diminishing value of the block reward, miners and transaction processors will go out of business, and bitcoin will become too insecure to store or transact large amounts of value. Currently, the block reward on the Bitcoin network is 6.25 new Bitcoin plus the fee for each transaction in the block. By 2140, the amount is expected to hit zero, but by 2028, the block reward will only be about 1.5 bitcoins. By then, the value of a single bitcoin will have to at least match the cost of securing the transactions within every block, or the size of every block will have to be sufficiently large for transaction fees to pay for the security of the blockchain.