The Rewards For A Bitcoin Miner

Importance of the Block Reward

Satoshi explained this in an early email post in Coins have to get initially distributed somehow, and a constant rate seems like the best formula.

The block reward creates an incentive for miners to add hash power to the network. The block reward is what miners try to get using their ASICs, which make up the entirety of the Bitcoin network hash rate. ASICs are expensive, and have high electricity costs. Miners are profitable when their hardware and electricity costs to mine one bitcoin are lower than the price of one bitcoin.

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This means miners can mine bitcoins and sell them for a profit. The more hash power a miner or mining pool has, the greater the chance is that the miner or pool has to mine a block.

As miners add more hash rate, more security is provided to the network. The block reward acts as a subsidy and incentive for miners until transaction fees can pay the miners enough money to secure the network. As mentioned earlier, Bitcoin users must pay a fee when sending a transaction on the network.

Eventually, these transactions fees will become larger and will help make up for the decreasing block reward. In a few decades when the reward gets too small, the transaction fee will become the main compensation for nodes. As with any commodity, a decrease in supply paired with no change in demand generally leads to higher price.

The mining activity also earns the successful miner any transaction fees. Blocks Mined Per Day Bitcoin was set up to try to track the amount of hashing capacity in the total network and to adjust the difficulty of the next batch of blocks every block nominally every 2 weeks.

The aim is to try to have the next blocks take 2 weeks to complete. Between the adoption of GPUs and the introduction of ASICs for mining this actually worked out quite well but the huge increases in hashing capacity enabled by ASICs have meant that the difficulty level has lagged behind.

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ASIC technology limits will eventually slow this but not for some months at least. The impact of steadily increasing hashing rates can be seen when we look at the date at which the fixed block reward halves. The genesis block was created onwith the first mined block being on The fixed reward halves every blocks so at blocks per day this should have been days later, or In practice block occurred onsome 39 days earlier.

If we consider more recent trends the effect is even more marked.

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