What is a block reward?
A block reward is compensation available under network rules for participating in valid block production. It incentivizes equipment, computing power or other resources that support transaction recording and network operation. A block is a rule-organized batch of transactions or other data.
In Bitcoin, miners producing blocks adopted by the network can claim newly issued BTC and fees from included transactions. Other networks can have different participation and allocation rules.
What comprises a block reward?
Bitcoin has two parts: the block subsidy newly issues BTC, while transaction fees transfer existing BTC. BTC is Bitcoin’s asset unit.
The protocol limits subsidies and reduces them through Bitcoin halving. Fees depend on included transactions and their individual fees, so blocks within one subsidy era can have different total rewards.
Component | Source | Main determining factors |
|---|---|---|
Block subsidy | Newly issued BTC | Block height and subsidy rules |
Transaction fees | Existing BTC paid by transactors | Included transactions and their fees |
How is one reward calculated?
In Bitcoin, the maximum claimable amount is:
Reward limit = subsidy at that height + sum of ordinary transaction fees in the block
From heights 840,000 through 1,049,999, the subsidy limit is 3.125 BTC. Hypothetical fees of 0.2 BTC give 3.125 + 0.2 = 3.325 BTC. This is not an actual block example.
Only 3.125 BTC is newly issued. High fees do not expand the permitted new-coin subsidy.
How do miners claim rewards?
The block’s first transaction, the coinbase transaction, specially claims rewards. Miners set its spending conditions; nodes running validation software check both the claim limit and the block’s validity.
Miners may claim less, not more. Unclaimed allowance cannot be claimed later. A block leaving the adopted chain cannot retain its reward as valid income on that chain.
Rewards cannot be spent immediately after inclusion. Coinbase outputs have a 100-block maturity requirement. A reward included at 800,000 can first be spent by a transaction included at 800,100. This compares inclusion heights, not a fixed time wait.
Pools combine miners’ computing power to search together. Participants receive payments under contribution measurement and settlement rules. Pool payout timing differs from network reward production; see mining.
What affects rewards and actual income?
Subsidy eras affect new coins. Halving reduces permitted issuance per block, not transaction fees in the same proportion.
Transaction demand affects fees. Amounts and reward shares fluctuate. After subsidy reaches zero, current rules leave rewards from transaction fees.
Price and costs affect net results. Equal BTC quantities have different market values. Electricity, equipment depreciation and operating costs remain. A reward is not profit or an automatic return for holding BTC.
Do other blockchains reward the same way?
Not necessarily. Bitcoin uses proof of work with miners competing; proof-of-stake networks use staked assets and other arrangements for validation duties.
In Ethereum, proposing blocks and voting validators can earn rewards for their respective duties, not equal shares of a fixed block income. Not all fees go to validators: the base fee is burned. See gas fees.
Compare who receives rewards, whether they come from issuance or fees, and which duties earn them.
Related terms
Explore mining, Bitcoin halving and block height, or return to the crypto glossary.
References
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