Block Reward

Block Rewards are incentives or prizes given to miners after they use their computing resources to successfully validate a new block of transactions and add them to the blockchain.

Miners on Proof-of-Work (PoW) blockchains use specialized computer equipment, or mining equipment, to solve complex hashing problems.

This is called mining.

Once the hashing problem is solved and the new block is added to the blockchain, the miner receives a reward in the form of the native cryptocurrency for that specific blockchain for all of the work they have done.

Remember, blockchains are just sequences of individual blocks, where each block contains a record of transactions that have taken place on the blockchain over some time period, along with a hash that is a reference to the preceding block.

The hash is a security feature that makes it almost impossible to forge the blockchain.

Each one of these blocks also contains a hashing puzzle or hashing problem, which needs to be solved before any other miner, before the block (collection of transactions) can be validated and added to the blockchain.

With potentially several hundred thousand transactions happening every day, like with bitcoin (BTC), it’s important to validate transactions as fast as possible.

Block rewards make this possible, as it’s more likely for a blockchain user to help the blockchain validate transactions if they’re getting paid.

Mining has now turned into an enterprise-sized market, with companies using server farms comprised of thousands of specialized mining servers and spending millions on monthly energy costs to run those servers, in an effort to be the miner of choice when it comes to validating transactions.

Related Terms

Genesis Block

The very first block or first few blocks recorded on a blockchain or blockchain-based protocol. The genesis block is often called Block 0 or Block 1. The genesis block sets the foundation for the rest of the blocks that are added to form a chain of blocks. That’s where we get the word “blockchain”. The most famous genesis block, and the very first Bitcoin block, called the Genesis Block, was created on January 3rd, 2009, by Bitcoin’s infamous and mysterious creator, Satoshi Nakamoto. Some consider this date to be the start of the cryptocurrency revolution – the start of it all!

Blockchain

Blockchain networks are at the heart of cryptocurrencies. A blockchain is a database, or digital ledger, made up of a series of interconnected blocks containing transaction data created on the network over some period of time. Each block in a blockchain also contains a unique identifier unlike any other block in the chain called a hash. Think of the hash as a fingerprint identifying that block for all other blocks. Distributed ledger technology (DLT) is another name frequently used in relation to blockchains.

Bitcoin (BTC)

Bitcoin (BTC) is most well known as a digital decentralized cryptocurrency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer Bitcoin network without the need for intermediaries, such as payment gateways or banks or routing services. Think of bitcoin as Internet money, that you can send and receive directly, to and from anyone, and you can use it to pay for stuff.

CPU

A CPU, or central processing unit, is the brain of a computer that executes, or processes, the instructions that come from computer programs, operating systems, and other computer hardware. It is the most important part of any computer. CPUs have become an integral component of crypto mining rigs, the computer hardware that is used to […]

Halving

The halving reduces the rate at which new bitcoin is created, specifically reducing block rewards, and in effect, reducing the incentive for miners to continue their work of securing the network.