What Is A Mining Reward?
Mining rewards are given to cryptocurrency miners when they successfully mine a block of the cryptocurrency in question. A mining reward is also referred to as a block reward. Each cryptocurrency has its reward system, but basically, mining works by rewarding people for finding blocks to record transactions made and stored on a blockchain.
Mining is done with highly powered mining rigs that are designed to solve mathematical problems to earn cryptocurrencies. These computers were initially developed to suit this function, and conventional computers with upgraded graphic capabilities also get mining rewards.
Halving is an essential concept in mining cryptocurrency. To avoid a cryptocurrency overflow, the reward is dispersed over time so that the total number of a single coin mined at any given moment does not surpass the time limit. In halving, this set amount reduces at intervals. By implication, the reward for mining a block reduces over time. A block can be described as a page in a digital ledger or record book.
Another reward for mining cryptocurrency is in the form of transaction fees. Even before the exhaustion of the supply, part of the transaction fees paid by users of a blockchain is paid to miners as compensation in addition to the standard reward per block. Mining rewards are not entirely without cost, and they are strenuous processes that require unique gadgets and a high power supply. The increased consumption of energy for mining processes and its effect on climate has been a significant concern for many people.
Mining rewards are important because they keep a blockchain network going by adding new pages to the digital ledger system of the network. This is why most blockchains have created systems to ensure the continuous rewarding of miners in the form of transaction fees even after the exhaustion of the total supply of a cryptocurrency in the network.
Mining Reward Example
Miners initially earn a reward of 50 BTCs for every block they mine, and this reward is halved to 25 BTCs after every 210,000 blocks. Presently, the reward for mining a block in Bitcoin is 6.25 BTCs. It is expected that by 2140, Bitcoin’s 21million supply will have been exhausted, and miners would be paid with transaction fees paid by users of its blockchain. Different networks and cryptocurrencies use other modified reward systems, which are generally similar to this.« Back to Glossary Index