A crypto block reward is the payment blockchain miners receive for successfully adding a new block to a blockchain.
Without block rewards, there would be little incentive for miners to secure the network, verify transactions, and keep everything running smoothly.
In this article, we’ll break down how block rewards work, why they change, and how they compare to staking rewards in Proof of Stake (PoS) systems.
How do crypto block rewards work?
Block rewards play a key role in keeping blockchain networks running. In Proof of Work (PoW) systems like Bitcoin, miners compete to solve complex mathematical puzzles. This process confirms Bitcoin transactions, secures the blockchain, and allows the miner to add a new block to the chain.
The block rewards compensate miners because:
- It motivates miners to invest in expensive hardware and electricity to secure the network.
- In many PoW systems, block rewards are the primary way new coins enter circulation.
How do you earn crypto block rewards?
In Proof of Work (PoW) systems, miners earn block rewards by successfully adding new blocks to the blockchain. To achieve this, each computer is a mining node that solves complex cryptographic puzzles. When a mining node successfully validates a block, it receives block rewards from two main sources:
- Newly generated coins: When a new block is added to the blockchain, the network generates new coins and rewards them to the miner. For example, in Bitcoin’s early days, each new block came with 50 BTC as a reward.
- Mining fees (transaction fees): Every transaction on the blockchain includes a small fee, known as a mining fee, which users pay to prioritize their transactions. These fees get collected and included as part of the block reward for the miner. Over time, as block rewards decrease, transaction fees become more important for miner incentives.
The role of miners in securing the network
Crypto mining is not just about earning rewards—it’s a critical part of blockchain technology that ensures security and stability. When miners compete to solve cryptographic puzzles, they:
- Verify and add transactions to the blockchain.
- Maintain the decentralization of the network, keeping it resistant to attacks.
- Ensure the blockchain operates without a central authority controlling it.
However, block rewards don’t stay the same forever. A key event called halving reduces the rewards over time, impacting miners and the network. Let’s explore how that works in the next section.
What is the crypto block reward after blockchain halving?
Block rewards don’t stay the same forever. Most Proof of Work (PoW) blockchains, like Bitcoin, have a built-in mechanism called halving, which reduces the block reward by 50% at regular intervals. The blockchain halving is designed to control the supply of new coins and make the cryptocurrency more scarce over time.
Why does blockchain halving happen?
The blockchain halving occurs to slow down inflation and extend the life of the blockchain’s rewards system. If block rewards stayed constant, all the coins would be mined too quickly, potentially reducing their long-term value. By cutting the rewards in half, the system ensures a gradual and predictable distribution of new coins.
How many bitcoins do you get for solving a block?
Bitcoin halvings happen approximately every 210,000 blocks (about every four years). Here's how Bitcoin’s block rewards have changed:
- 2009 Bitcoin block reward: 50 BTC per block
- 2012 Bitcoin block reward: 25 BTC per block
- 2016 Bitcoin block reward: 12.5 BTC per block
- 2020 Bitcoin block reward: 6.25 BTC per block
- 2024 Bitcoin block reward: 3.125 BTC per block
This cycle continues until Bitcoin reaches its maximum supply of 21 million coins, expected around the year 2140.
How does blockchain halving affect blockchain miners?
Since miners earn fewer rewards after each halving, they face new challenges:
- Lower profitability – If Bitcoin’s price doesn’t rise to offset the reward reduction, some miners may struggle to cover electricity and hardware costs.
- Mining consolidation – The Bitcoin halving make mining new Bitcoin become too difficult for small miners to compete. As a result, smaller miners may exit, leaving only large-scale operations, which could lead to the centralization of mining power.
- Increased reliance on transaction fees – As block rewards shrink, transaction fees become a more important source of income for miners.
How blockchain halving affect the crypto market?
Historically, Bitcoin halving events have led to price increases because they reduce the supply of new coins entering the market. With fewer new Bitcoins available, demand often rises, leading to higher prices.
Bitcoin’s price surge often triggers a ripple effect across the entire crypto market. Altcoins (alternative cryptocurrencies) tend to follow Bitcoin’s lead, but with a delay. Once Bitcoin's price stabilizes after a halving rally, traders often shift their profits into smaller-cap altcoins, leading to what’s known as altcoin season (alt season)—a period when altcoins outperform Bitcoin in percentage gains.
During alt season, smaller cryptocurrencies experience massive price surges, sometimes growing at a much faster rate than Bitcoin. This happens because:
- Bitcoin’s dominance declines as traders look for higher returns.
- Investors take profits from Bitcoin and reinvest in altcoins.
- Speculation on new blockchain projects and innovations increases.
However, the alt seasons don’t last forever. Eventually, when a larger portion of the total Bitcoin supply is in profit, Bitcoin investors start taking profits. If buying demand is not strong enough to absorb the selling pressure, Bitcoin’s price gradually declines, potentially triggering a bear season in the crypto market.
Crypto block rewards vs. crypto staking rewards
Block rewards and staking rewards both incentivize participants to secure the blockchain—but they work in completely different ways. The main difference lies in the consensus mechanism used:
- Block rewards come from Proof of Work (PoW) blockchains, where miners compete to solve complex puzzles and validate transactions.
- Staking rewards come from Proof of Stake (PoS) or Delegated Proof of Stake (DPoS) blockchains, where participants stake (lock up) their coins instead of using computational power. These users are validators. Instead of solving mathematical puzzles like miners, validators are randomly selected based on the number of coins they have staked. Their role is to verify transactions and create new blocks. In return, they receive staking rewards, which come from transaction fees or newly minted coins.
This fundamental difference between PoW and PoS leads to major variations in how rewards are earned, and the overall security of the blockchain.
1. Source of rewards
- Block rewards (PoW): New coins are created and given to miners for successfully adding a block to the blockchain.
- Staking rewards (PoS): Rewards come from transaction fees and newly issued coins, distributed to validators who stake their tokens.
2. How participants earn rewards
- Block rewards: Miners use specialized hardware to compete in solving cryptographic puzzles. The first to solve it earns the reward and adds a new block.
- Staking rewards: Users stake their coins to become validators. The network randomly selects validators to confirm transactions and add blocks, rewarding them with staking rewards.
3. Security and decentralization
- PoW block rewards: The network’s security depends on miners competing to validate transactions. However, mining power can become concentrated in large mining pools, potentially reducing decentralization.
- PoS staking rewards: The network’s security depends on validators staking their coins. While it is more energy-efficient, it can also lead to wealth concentration since validators with more coins have a higher chance of being selected.
The future of block rewards and blockchain security
Block rewards have played a critical role in blockchain adoption and security, but they are not a permanent solution. As crypto evolves, new incentive models will shape the future of decentralization, transaction processing, and blockchain security. Whether through higher transaction fees, staking rewards, or innovative hybrid systems, the long-term success of blockchain networks will depend on how well they adapt to the changing reward landscape.
FAQ
Is Bitcoin mining illegal?
Bitcoin mining is legal in many countries, but some governments have banned or restricted it due to concerns about energy consumption, regulatory issues, or financial stability. Countries like China, Egypt, and Morocco have strict regulations or outright bans on mining activities.
Do Bitcoin miners get transaction fees?
Yes, Bitcoin miners earn transaction fees in addition to block rewards. When users send Bitcoin transactions, they include a small fee to incentivize miners to process their transactions quickly. As block rewards decrease over time, transaction fees will become a more important source of income for miners. This shift helps maintain network security and miner participation.
What is a block subsidy?
A block subsidy is the portion of the block reward that comes from newly minted coins. In Bitcoin, the block reward consists of both the block subsidy and transaction fees. The block subsidy decreases over time through halving events, reducing the number of new coins created with each block. Eventually, the block subsidy will drop to zero, and miners will rely entirely on transaction fees.
How often is a new block added to Bitcoin?
On average, a new block is added to the Bitcoin blockchain every 10 minutes. The network maintains this interval by adjusting the mining difficulty approximately every two weeks. If blocks are mined too quickly, the difficulty increases, and if they are mined too slowly, the difficulty decreases.
Are crypto block rewards taxable income?
Yes, most countries classify crypto block rewards as taxable income. Tax authorities consider these rewards as ordinary income based on their market value when received. If miners sell their earned coins later, they may also owe capital gains tax on any profit. The exact tax treatment varies by country, so miners should track their earnings and consult a tax professional to ensure compliance. Keeping accurate records helps avoid potential tax issues.
How many rewards do you get on the Bitcoin blockchain network?
The number of bitcoins awarded for mining a block decreases over time due to halving events, which occur approximately every four years. When Bitcoin launched in 2009, miners earned 50 BTC per block. As of 2024, the reward has dropped to 3.125 BTC per block because of multiple Bitcoin halving.
How long does it take to get a Bitcoin block reward?
Bitcoin’s network mines a new block approximately every 10 minutes. The system automatically adjusts mining difficulty every 2,016 blocks (roughly two weeks) to keep this timing consistent. If more miners join and solve blocks faster, the network increases the difficulty of restoring the balance. This mechanism ensures a steady and predictable issuance of new bitcoins over time.
