Block Reward

Block reward is the total income received by a network participant for creating and having a new block accepted by the blockchain. Depending on the rules of a particular network, it may consist of several components.

What the Reward Consists Of

The most common structure includes:

• block subsidy — the amount of new coins created by the protocol;
• transaction fees — amounts associated with transactions included in the block.

These components may have different economic significance depending on the specific blockchain and the current activity of its users.

Subsidy and Fees

The block subsidy is determined by the protocol rules. In some networks, it gradually decreases according to a predefined schedule. The fee component depends on user activity and demand for transaction inclusion.

The reward is recorded through a special Coinbase Transaction.

Impact on Mining Profitability

The size of the reward is directly related to the economics of mining. With unchanged computational power, a reduction in the reward decreases expected income if all other parameters remain unchanged.

However, actual profitability depends not only on the size of the reward. Network difficulty, total hashrate, electricity cost, pool fees, and the market value of the coins received must also be considered.