A block reward is the prize a cryptocurrency miner receives for adding a new block to the blockchain. Because there is no central authority on a blockchain, the network depends on users to verify blocks of transactions and add them to the blockchain. This process, called mining, also brings new coins into circulation — similar to the way miners discover gold and other precious metals in the earth. These riches, called block rewards, motivate miners to update and maintain the ledger, which is vital for the security, integrity and stability of the blockchain.
What Are Block Rewards?
Block rewards are cryptocurrency payments given to cryptocurrency miners who add new blocks to a blockchain.
How Do Block Rewards Work?
Block rewards most commonly refer to the mining incentives on proof-of-work blockchains like Bitcoin, Litecoin, Bitcoin Cash and Dogecoin. These blockchains are immutable ledgers maintained by a decentralized network of globally distributed nodes, or computers running the blockchain’s software. Validator nodes verify the legitimacy of transactions, while specialized mining nodes group them together into a block, which is then added to the blockchain.
To add a block to the blockchain, the mining node must first solve a series of complex cryptographic puzzles. Through a process similar to encryption, each block’s data is translated into a unique alphanumeric code called a hash. High-powered computers generate trillions of potential hashes for a block, with the goal of finding one lower than the target hash determined by the blockchain algorithm.
The first node to guess an appropriate hash has mined the block, cryptographically linking it to the preceding blocks on the chain. From there, the miner receives the block reward, which is typically the first transaction added to any newly created block. This transaction, called the coinbase transaction, includes the newly generated cryptocurrency from a block and the transaction fees associated with the transactions in that block.
Why Are Block Rewards Important?
Block rewards are important because they create incentives for miners to validate transactions, secure the blockchain and bring new currencies into circulation. In a centralized system, a company or government would be responsible for these duties, but decentralized blockchains are able to verify the accuracy of transactions through mechanisms that rely on the self interest of individuals rather than trust in an institution.
Components of Block Rewards
Block rewards consist of two main components: block subsidies and transaction fees.
Block Subsidies
The largest part of the block reward is the block subsidy, which is the newly minted cryptocurrency created by the new block. However, block subsidies often gradually decrease over time due to programmed events like “halvings,” where the reward is reduced by 50 percent to help control inflation.
Transaction Fees
The block reward also includes smaller transaction fees that other users pay to execute their transactions. Miners prioritize transactions with fees, so users may choose to pay a higher fee to have their transaction processed quicker. Over time, as block subsidies decline, transaction fees may play a larger role in incentivizing miners.
Block Rewards vs. Staking Rewards
Block rewards are given to miners for adding new blocks to proof-of-work blockchains, while staking rewards are given to validators who support proof-of-stake networks with their own crypto.
On proof-of-stake blockchains like Ethereum, transactions are verified by users who have “staked,” or put up as collateral, their own funds to show they can be trusted. If they attempt to manipulate or falsify blockchain transactions, they could lose their staked funds. Validators with the largest stakes are more likely to be chosen by the algorithm to “propose” a new block to the blockchain.
Once a validator has proposed a block of transactions they’ve verified, other validators must attest to the accuracy of the block. The vetted block is then added to the block chain, and the validator who proposed the block receives a staking reward, which includes newly minted coins and transaction fees.
Bitcoin’s Block Rewards Mechanism
Bitcoin was designed to add a new block every 10 minutes, which ensures transactions are regularly validated while preventing a mining rush that could lead to inflation. This 10-minute block time is maintained through a mining difficulty level that adjusts based on the amount of mining activity on the network.
Another deflationary measure, called "halving” requires block rewards to be divided in half after every 210,000 blocks created. This typically happens every four years. When the Bitcoin blockchain launched in 2009, miners received 50 newly minted bitcoins for every block they created. That reward has decreased dramatically since then, with the most recent “halving” event in April 2024 cutting the block reward from 6.25 bitcoin to 3.125 bitcoin. The next halving event is expected to occur in 2028.
These rewards will continue to taper off as the supply of new Bitcoin dwindles. Nearly 20 million bitcoin are in existence as of February 2025, and the blockchain is on pace to reach its maximum supply of 21 million by 2140. This limitation in bitcoin supply was coded into the original Bitcoin protocol to prevent inflation and preserve the currency’s value.
The Future of Block Rewards
When block rewards are halved, it slows the rate at which new coins are brought into circulation. This deflationary measure increases the value of the coin, but it also may make mining less profitable. In the future, miners will become more reliant on transaction fees, which may increase to cover the costs of the computers and electricity needed to mine new blocks.
Frequently Asked Questions
What is a block reward in blockchain?
A block reward is a financial incentive for cryptocurrency miners to verify the accuracy of recent transaction data, add that data to the blockchain and bring new cryptocurrency into circulation. This ongoing maintenance contributes to the security and integrity of the decentralized network.
How often does a block reward help?
On average, block rewards are issued every 10 minutes on the Bitcoin blockchain. Other blockchains, like Litecoin and Bitcoin Cash, are designed to mine blocks quicker. Litecoin, for example, adds a new block (and issues a block reward) every 2.5 minutes.
How long does it take to get a block reward?
The amount of time it takes to mine a new block and get a block reward depends on the blockchain. Bitcoin is designed to add a new block every 10 minutes, whereas Litecoin averages a new block every 2.5 minutes. Even within blockchains, there’s variability in block time that depends upon mining difficulty and network activity.
