Mining Reward

What Is a Mining Reward?

As the name suggests, a mining reward is a compensation that’s given to a miner who successfully manages to process a block of transactions — adding it to the blockchain in the process.

Back when the Bitcoin blockchain first launched, mining rewards were set at 50 BTC. This has subsequently halved every four years — in 2012, 2016 and 2020.

Although this does mean that the mining reward has been reduced substantially since Bitcoin first launched, there has been an increase in the cryptocurrency’s value which means that miners receive more in monetary terms.

As the supply of new Bitcoin that’s distributed through mining rewards continues to diminish, transaction fees are going to become an ever more important source of income for miners. Such fees do tend to be included in mining rewards.

Mining rewards play a starring role in creating an incentive for miners to secure the network.

Although most of Bitcoin’s supply is already in circulation, newly minted coins are still going to be around until 2140.

Because of how energy-intensive Proof-of-Work consensus mechanisms are, some blockchains are beginning to make a concerted push away from mining — and are introducing new ways of rewarding those who secure the network.

One such example is Proof-of-Stake. This is where validators effectively lock up a set amount of cryptocurrency in a network. From here, their mining power is determined by the value of their investment — or they are chosen at random. In many cases, validators are solely rewarded in the form of transaction fees for their efforts.