Block Reward

A block reward is the amount of cryptocurrency the producer of a new block is allowed to claim for adding it to the chain. On Bitcoin it has two parts: a block subsidy of newly created coins, set by the protocol, and the transaction fees paid by every transaction the producer picked from the mempool for that block. The reward is collected through a special first transaction in the block, called the coinbase transaction.

The block reward is both the incentive that pays for network security and, on many chains, the only way new coins enter circulation. It is therefore central to a coin's tokenomics. This entry covers the protocol rule; how individual miners share and receive income is covered under mining reward and mining pool. Bitcoin's subsidy shrinks on a fixed timetable through the halving.

Imagine a town that pays volunteers to guard the town ledger. Each time a guard seals a new page, the town prints a fixed bonus for that guard, and every customer whose entry is on the page also leaves a tip. The bonus is new money; the tips are money that already existed.

The town has promised that the printed bonus will be cut in half every few years, until one day it stops altogether. After that, the guards will live on tips alone. A block reward is exactly this pairing of a shrinking printed bonus and the customers' tips, paid each time a new page is added to the shared book.

The block reward is the subsidy plus the fees in the block:

The subsidy depends only on the block's block height:

• $R$ is the total block reward, in BTC.
• $S(h)$ is the subsidy for a block at height $h$.
• $\lfloor h / 210000 \rfloor$ is the number of halvings that have already happened (the whole-number part of the division).
• $f_i$ is the fee paid by transaction $i$, and $n$ is the number of fee-paying transactions in the block.

Worked example: a block at height 900,000 sits after $\lfloor 900{,}000 / 210{,}000 \rfloor = 4$ halvings, so its subsidy is $50 / 2^4 = 3.125$ BTC. If its transactions paid 0.05 BTC in fees in total, the producer may claim $3.125 + 0.05 = 3.175$ BTC. A miner may claim less than the maximum (the unclaimed amount is lost for good) but never more; full nodes reject any block that overpays itself. Newly created coins cannot be spent until 100 further blocks have been added, so that rewards from a block that later becomes a stale block cannot leak into circulation.

Because the subsidy halves every 210,000 blocks, roughly every four years, total issuance converges on just under 21 million BTC, the cap described in 21 million bitcoins. Amounts are tracked internally in satoshis, and once the subsidy falls below one satoshi it becomes zero, which is expected around the year 2140.

As the subsidy shrinks, fees must make up a growing share of miner income if hashrate, and therefore resistance to a 51% attack, is to be maintained. Whether fees alone will be enough is a long-running debate, often framed as Bitcoin's "security budget".

While the Ethereum blockchain used proof of work, each block paid a fixed issuance: 5 ETH at launch in 2015, cut to 3 ETH by the Byzantium upgrade in October 2017 and to 2 ETH by Constantinople in February 2019. Miners of valid blocks that lost the race, called uncles or ommers, received a smaller reward.

Two upgrades changed this. The London upgrade of August 2021 introduced EIP-1559, under which each block's base fee is burned rather than paid to the producer, who keeps only the priority fee (tip); see burning tokens and gas fee. The Merge in September 2022 removed block and ommer rewards entirely, as specified in EIP-3675. Under proof of stake, new ETH is issued to validators by the consensus layer for proposing and attesting, at a rate that depends on how much ETH is staked, while block proposers still receive priority fees.

A predictable, falling subsidy is the basis of claims that Bitcoin is a scarce, disinflationary asset, and each halving draws market attention. Critics point out that the subsidy cuts squeeze miners with high power costs, can push hashrate toward regions with the cheapest electricity, and leave long-term security dependent on fee demand. Proof-of-stake systems face a parallel debate about how high issuance should be set to pay for staking without diluting holders.

• Bitcoin: A Peer-to-Peer Electronic Cash System
• EIP-3675: Upgrade consensus to Proof-of-Stake
• ethereum.org: Proof-of-stake rewards and penalties