How are you? By Allah's grace, I'm doing very well.

Source

'Block reward' is a very basic economic concept in the cryptocurrency and blockchain ecosystem. Simply put, when a miner or validator in a blockchain network successfully verifies a new group of transactions or 'blocks' and permanently adds them to the main chain, the network automatically gives him a reward as recognition and value for his hard work. It is basically a brand new cryptocurrency, which enters the market for the first time from digital mines.

How it works and its necessity

In a decentralized network, there is no bank or central authority that will ensure the authenticity of transactions or guard the entire system. This guarding or security work is done by miners spread around the world. They use their high-powered computers and a lot of electricity to solve the complex mathematical puzzles of the blockchain. Now the question is, why would miners spend their own pocket money to do this? The answer to this question is the block reward. Miners are motivated to maintain the security of the network in the hope of this guaranteed and attractive financial gain. Whenever a miner is the first to find the mathematical solution to a block, the blockchain protocol automatically creates some new coins and sends them to that miner's wallet. In addition, the miner receives the transaction fees of all transactions in that block as a bonus.

Halving and Block Reward Changes

The amount of the block reward does not always remain the same, but rather it decreases over time according to a certain rule. Let's take the case of Bitcoin, where every 4 years (or after every 210,000 blocks mined) this block reward is exactly halved, which is technically called 'Bitcoin Halving'. When Bitcoin started its journey in 2009, the reward for each block was 50 Bitcoins. Later, it decreased to 25 in 2012, 12.5 in 2016, and 6.25 in 2020. After the last halving in April 2024, the current block reward stands at just 3.125 bitcoins. In this way, when 21 million bitcoins are completely mined, the block reward will drop to zero.

Conclusion

In short, block rewards are the oxygen of the cryptocurrency network, which is an automatic and well-regulated method of releasing new coins into the market without the intervention of any central bank. On the one hand, it provides an economic incentive for miners to keep the network secure, and on the other hand, it helps maintain the scarcity of digital currencies and maintain their market value. When the block reward is completely exhausted in the future, only transaction fees or transaction fees will remain as the only income for miners and keep the network running. Today's discussion concludes here. I hope you've found it interesting. Please share your thoughts on today's topic. Prayers for everyone. May everyone be well. Amen.