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Block Reward – Blockchain

Block Reward Definition

The block reward in a blockchain is the payment a miner or block creator receives, if he finds a valid block (see mining). In Proof of Work systems it is also called mining reward.

The block reward serves as a remuneration of the miner or block creator for its work. It is therefore part of the incentive structure to keep the network safe.

In some cases a fraction goes to the developers of the blockchain like in ZCash. This is then called developers reward.

Beside incentivizing the miners to do their job, the block reward also is a way to create and distribute new coins in a crypto currency. Another approach would be to generate all coins in the genesis block (pre-mining).

The exact amount is stated in the protocol of each crypto currency and can vary according to the protocol.

The following table shows all possible combinations of initial supply, development and total supply.

initial supply development total supply Examples
0 increase infinite Monero, Dogecoin
0 increase maximum cap Bitcoin, ZCash
> 0 constant constant IOTA
> 0 increase infinite Ethereum, EOS. LISK
> 0 increase maximum cap
> 0 decrease minimum cap
> 0 decrease Ripple

Bitcoin Block Reward

The Bitcoin block reward decreases every 210,000 blocks by 50 % of its actual value. With an average block finding time of ten minutes the so called halving happens roughly every four years.

At the beginning in 2009 the block reward of Bitcoin was 50 BTC. The following table shows the development of the Bitcoin block reward from its inception until the year 2084.

Date (year, month, day, time) of the first block after the halving From Block till Block Reward per block
2009-01-03 19:15 0 – 209,999 50 BTC
2012-11-28 16:24 210,000 – 419,999 25 BTC
2016-07-09 18:46 420,000 – 629,999 12.5 BTC
2020-05-11 21:23 630,000 – 839.000 6.25 BTC
2024 840,000 – 1049,999 3.125 BTC
2028 1050000 – 1259999 1.5625 BTC
2032 1260000 – 1469999 0.78125 BTC
2036 1470000 – 1679999 0.390625 BTC
2040 1680000 – 1889999 0.1953125 BTC
2044 1890000 – 2099999 0.09765625 BTC
2048 2100000 – 2309999 0.048828125 BTC
2052 2310000 – 2519999 0.024414063 BTC
2056 2520000 – 2729999 0.012207031 BTC
2060 2730000 – 2939999 0.006103516 BTC
2064 2940000 – 3149999 0.003051758 BTC
2068 3150000 – 3359999 0.001525879 BTC
2072 3360000 – 3569999 0.000762939 BTC
2076 3570000 – 3779999 0.00038147 BTC
2080 3780000 – 3989999 0.000190735 BTC
2084 3990000 – 4199999 9.53674E-05 BTC

development Bitcoin blockreward till year 2140

The number of newly created Bitcoins decreases quickly. Which means that the total supply grows quickly at the beginning but decelerates in the future.

The dispensation of the block reward stops in the year 2140, since after the last halving the amount would be smaller than one Satoshi (the smallest denomination of BTC).

Technical background of Bitcoin Block Rewards

Commonly, in Bitcoin a special transaction is used for the block reward. In Bitcoin it is called coinbase transaction or generation transaction. It has no input but an output with the amount of the block reward which allows the holder of the corresponding private key to the receiver address to spend it.

Only the miner is allowed to add a coinbase transaction.

Beside issuing new coins the coinbase transaction serves another purpose in the mining process. It has a coinbase parameter which can hold arbitrary data. It is used for mining since it contains the extraNonce field which is updated if the nonce is exhausted.

In a block explorer you can see the block reward and the mining fees.

Bitcoin blockreward

Blockreward_Bitcoin.jpg. source: blockchain.com

Ethereum Block Reward

In Ethereum there is no extra transaction for paying the block reward. Instead the balance of the miners account is increased. The exact amount is given in the latest protocol. And in the past it changed from time to time. The change was not given in the original specification. Instead, the community agreed upon new amounts considering inflation, costs for the miners, etc. The value in the yellow paper is not up to date anymore.

The code can be found here: https://github.com/ethereum/go-ethereum/blob/v1.9.10/consensus/ethash/consensus.go#L638

Compared to Bitcoin Ethereum did not only reward miners of a block which made it into the longet chain. It also payed a certain amount to so called ommers. Ommers are blocks which build upon a recent block but didn’t make it into the longest chain. The idea was that miners who created an ommer also contribute to the stability of the network. But du to the short block finding time of around 12 seconds more orphaned blocks are created.

Ommer Ethereum

Nowadays Ethereum doesn’t reward ommers anymore.

The easiest way to see the reward of a certain block is using a block explorer like Etherscan.

The figure shows the block reward of the Ethereum block 10697205. It is the sum of the block reward and the transaction fees. You can also see that there is no uncle or ommer reward.

Block Reward Ethereum

source: https://etherscan.io/block/10697205

The uncle reward (or ommer reward) is not payed anymore in Ethereum.

Monero Block Reward

Monero, like Bitcoin, issues the block reward in a so called coinbase transaction. But it decreases continuously until the so called tail phase where it remains constant.

ZCash Block Reward

The block reward of ZCash also gets adjusted periodically. Initially 12.5 ZEC were created with each block. After 840,000 mined blocks (approximately four years) the amount gets halved. The maximum supply will be 21,000,000 ZEC.

Until November 2020 20% of this amount go to the founders of ZCash. This is the so called Founders Reward.

Litecoin Block Reward

Litecoin halves its mining reward every 840,000 blocks (app. every four years). The initial mining reward in 2011 was 50 LTC.

As you can see in the following picture the coinbase transaction in Litecoin has a coinbase parameter in its input. The output references 50 LTC.

Litecoin Coinbase Transaction

Source: https://chainz.cryptoid.info/ltc/tx.dws?1.htm Block 1

Block Reward vs. Transaction Fee

The difference between block rewards and transaction fees is that the block reward is created out of nothing. It is a way of creating new coins. It is a means of controlling the inflation and the money supply.