Block Reward (Miner Reward)
Block reward, miner reward, or mining reward is the cryptocurrency miners get rewarded when they create a new block for the blockchain network. Miners try to solve hashes of the block, which are hashed cryptographic problems, and try to find a solution, also called proof of work, to create the new block in the next chain. Miner reward is an incentive for miners to secure the network.
There are two parts of the block reward:
- The block subsidy: In popular terms, crypto traders assume that block subsidy is the miner reward itself. However, even though it has a much more significant value compared to the transaction fees, block subsidy is a subset of the miner reward. It consists of the newly generated coins in each block. When the new block is validated and created, this amount is generated as the particular cryptocurrency.
- Transaction Fees: The miner of the block takes all the transaction fees that are paid from the transactions. Since the cryptocurrency network becomes overwhelmed and slow, traders tend to spend more transaction fees to complete their transactions faster. This will cause an increase in the transaction fees in the miner reward.
What is Coinbase Transaction?
Coinbase transaction is the name of the transaction of the newly generated coins. These coins were created with this transaction. Moreover, the coinbase transaction is the first transaction added to the new block.
What is Halving?
The halving is the process of decreasing the price of mining rewards at certain intervals. The name halving comes from “taking the half”. Therefore, the price of block reward drops in half when the halving occurs.
The biggest cryptocurrency (in terms of market capitalization value), Bitcoin, uses this halving to keep the current value of Bitcoin in the supply and demand principle. Also, the system rewards believers of Bitcoin from the beginning because new miners get less in every halving.
