A block reward is the incentive for which miners spend computing power maintaining the network. When a miner finds a valid hash and forms a new block, the protocol awards them a reward. It consists of two parts: the issuance of new coins created by the network and the sum of fees for all transactions included in that block.
The ratio of these parts depends on the specific cryptocurrency and the stage of its development. In most networks with a limited issuance, the amount of new coins issued gradually decreases. In the Bitcoin network this happens through the halving mechanism — roughly every four years the reward in the form of new coins is cut in half. As fewer and fewer new coins are mined, transaction fees play an ever greater role in miners' income.
What the reward consists of
- issuance of new coins created by the protocol;
- fees for transactions included in the block;
- periodic reduction of issuance (for example, the halving in Bitcoin).
The block reward serves a dual purpose: it motivates miners to ensure the security of the network and at the same time regulates the issuance of new coins into circulation.
