Miners are rewarded for approving transactions with a block reward. Users often receive this cryptocurrency after they “mine” a block. Cryptocurrencies employ the mining process to create new coins and validate fresh transactions. The block reward consists of two parts:
Block subsidy: The reward’s primary component. It is the quantity of newly created coins.
Transaction fees: The fees paid by the transactions that are part of the block make up the remaining portion.
Users are frequently rewarded for solving challenging mathematics problems. Users of Bitcoin, for instance, receive bitcoins after a successful transaction verification. However, after four years, or if the miner has mined more than 210000 blocks, the payout is reduced to half. This is done to keep a high level of demand and enhance the value of bitcoins. Rewards, therefore, change over time in nature.
Block rewards are used for:
Security: The network is protected using the rewards that miners receive. There is no participation of a centralized authority to secure the network because blockchain is highly decentralized. Therefore, the miners must protect the blocks.
Economic: Economically, the new cryptos on the market can only be distributed through Block Rewards. The native cryptos of the network are used as rewards whenever a miner successfully validates a block. The new currency is dispersed in this manner.
