Block Reward

In order for a blockchain to remain secure, each node on the network needs to be incentivized to act honestly. Block rewards are a key part of that incentive, providing material rewards for the miners and stakers whose participation is necessary to maintain the network’s security and efficiency.

Block rewards are typically made up of two parts: a block subsidy and transaction fees. The transaction by the users whose transactions were included in that block, while the block subsidy is automatically paid out by the network itself in the form of newly-minted coins.

In Proof-of-Work (PoW) systems like bitcoin, miners dedicate computing resources to solving cryptographic puzzles. The first to solve the puzzle gains the right to broadcast the next block on the network, claiming the associated block reward in the process. The block subsidies included in these rewards are the primary means of issuance for new bitcoin — each new block steadily increases the new supply. In the case of bitcoin, these block subsidies are halved every four years, eventually tending towards zero. When this happens, the block reward will consist of transaction fees alone.

Proof-of-Stake (PoS) networks — such as Ethereum, Solana, Base, and BNB Chain — do not require participants to dedicate sizable amounts of computing power. Instead, mining rewards are replaced by staking rewards; validators lock up some of the network’s native tokens as collateral and receive automatic returns in return (typically measured in % APY). Both systems are designed to incentivize network uptime and honest behavior.