What Is A Block Reward?
A block reward refers to the coins awarded to miners for solving the cryptography problem needed to create a new block on a blockchain.
The blockchain offers a record-keeping system that is impossible to alter or cheat. By inherent design, nobody can modify the data on a blockchain, meaning users can always trust it to be accurate. Each block on the blockchain contains a record of transactions completed within a given period that needs verifying and securing before being added to the blockchain. Miners are responsible for completing that task, and for each job they finish, they get a reward.
The block reward serves as an incentive for miners to verify, secure, and process transactions made with a cryptocurrency. To achieve that, miners need to solve complex mathematical problems using specific mining equipment. For instance, miners originally mined Bitcoin using conventional CPUs. Later they moved to use GPUs as it was more efficient. They now use dedicated hardware known as ASICs, which are special computers with more hashing power from graphic cards.
Bitcoin miners get bitcoin rewards and transaction fees after successfully solving the complex math problem required to create a new block of verified bitcoin transactions. The bitcoin rewards miners earn are the only way the system can produce new bitcoins. During the early days of bitcoin, miners got bitcoin rewards as high as 50 bitcoin. However, due to Bitcoin’s halving principle in which the block reward halves after every 210,000 blocks or roughly every four years, the number of block rewards is lower now and will eventually hit zero around 2140.
Ethereum, the second-biggest cryptocurrency by market capitalization, also uses block rewards incentives to miners to find solutions to the complex mathematical problem it needs for new blocks. Ethereum miners get awarded Ether and gas fees for each successful block created.
Block Reward Example
After learning about Bitcoin mining, Jerry decides it might be worth giving a shot. So he purchased Bitcoin Miner equipment, an application-specific integrated circuit (ASIC) that contains specialized chips that attempt to solve highly complex computational math problems. After a month and numerous attempts, Jerry was finally the first to solve one of the problems. He got 6.25 BTC as a reward.« Back to Glossary Index