Block Reward Definition
What is a Block Reward?
A block reward is the amount of Bitcoin or cryptocurrency that is awarded to a miner for confirmation of transactions in a block. This serves 2 purposes. It provides incentives to miners to invest in the network and it helps release new coins into the ecosystem. This mechanism for releasing more coins into the ecosystem is a system for controlled inflation that without a central governance.
Mining on a Proof of Work algorithm like Bitcoin involves equipment like ASIC (Application Specific Integrated Circuits) or GPUs which you would find in your home computer. You are taking all the transactions and confirming that they are valid transactions. Each transaction is bundled together and is called a block. Several of these blocks linked together is a blockchain. On the Bitcoin network, every 10 minutes, each blockchain is governed by a hash code which is verified by the network. The winner of the block is then rewarded a block reward.
Block rewards can change over time. This is due to two main variables.
- Network difficulty – This changes overtime with how many people are mining on the network to receive a reward.
- Reward halving – For Bitcoin, the reward is cut into half and occurs once 210,000 blocks are found.