Block Subsidy

Block subsidy is the portion of the block reward whose amount is determined by the rules of a particular blockchain. In networks that issue new coins, the subsidy represents the number of new units of the asset created when a block is formed.

How the Subsidy Is Determined

The subsidy amount is specified by the protocol. It is not determined directly by the miner and does not depend on the miner's computational power. If a miner successfully creates a block, it can receive only the subsidy specified by the network rules at that time.

In some blockchains, the subsidy remains constant; in others, it gradually decreases. Changes may occur through predefined events or protocol conditions.

Subsidy and Fees

The subsidy should not be confused with transaction fees. The subsidy is related to issuance rules and is provided by the protocol for creating a block, while fees are generated by users when they submit transactions.

Both components may form part of the miner's total reward and be recorded in the Coinbase Transaction.

Impact on Mining Economics

A change in the subsidy can significantly affect hardware profitability. If the subsidy decreases, the miner receives fewer new coins per block, all else being equal.

However, the impact of a lower subsidy may be partially offset by higher transaction fees, changes in the asset's price, or changes in network competition. Therefore, profitability should be evaluated based on the total block reward, rather than the subsidy alone.