Block Reward

Understanding the Block Reward

Blockchains consist of a sequence of blocks that contain records of transactions completed within a specific period. Each block has a cryptographic hashing problem that must be solved for the block to be added to the blockchain. Miners who successfully solve these problems are rewarded with cryptocurrency. This process of solving hashing problems is known as mining. In most cases, groups of miners using specialized mining equipment create blocks on Bitcoin and other blockchains. Initially, CPUs could be used to mine Bitcoin, but as time passed, it became more efficient to use GPUs and eventually dedicated hardware called ASICs.

On the Bitcoin blockchain, the original reward for solving a hashing problem was 50 BTC. However, this reward gradually decreases over time, reducing by 50% every 210,000 blocks. This event is known as halving. Based on the current rate of discovery, a Bitcoin halving occurs approximately every four years. After 64 halvings, the reward will eventually reach zero.

The miner receives the block reward as the first recorded transaction in the block. Bitcoin mining is now mainly profitable for large-scale mining operations that utilize expensive hardware, controlled environments, and locations with low energy costs.