Block Reward
Block reward is the total compensation a miner receives for successfully mining a valid Bitcoin block. It consists of two components: the block subsidy (newly created bitcoins) and the sum of all transaction fees included in that block.
Understanding Block Reward
Section titled “Understanding Block Reward”Every time a miner (or mining pool) finds a valid block and it is accepted by the network, they earn the block reward. This reward is encoded in a special transaction called the coinbase transaction, which is the very first transaction in every block. Unlike regular transactions, the coinbase transaction has no inputs — it creates new bitcoins out of thin air according to the protocol rules.
Think of it like a gold prospector’s payment. The block subsidy is like a government bounty for finding new gold deposits — a fixed amount per discovery. The transaction fees are like tips from the people whose gold the prospector processes along the way. The total payout is the bounty plus the tips.
The block subsidy started at 50 BTC when Bitcoin launched in 2009 and is halved every 210,000 blocks (roughly every four years). As of the April 2024 halving, the subsidy is 3.125 BTC per block. Over time, as the subsidy continues to halve, transaction fees will become an increasingly important part of the block reward.
Practical Example
Section titled “Practical Example”A pool mines block #840,001. The coinbase transaction awards 3.125 BTC (the current subsidy) plus 0.35 BTC in total transaction fees collected from the roughly 3,000-4,000 transactions included in the block. The total block reward is 3.475 BTC. The pool then distributes this reward among its miners according to their contributed shares and the pool’s payout scheme (PPS, FPPS, PPLNS, etc.).