Blog Details

06, Apr

The Blockchain Block Rewards

Unlike fiat currencies, which can have their supply increased at any moment by printing more cash, in Proof of Work (PoW) cryptocurrencies new coins are generated through a process called mining. This means that no government or entity has the power to alter the rate at which new coins are put in circulation or total maximum supply of the cryptocurrency.

In most PoW blockchains, the issuance of new coins is predictable and pre-programmed, with new coins being created with each new block that is mined.

For example, in Bitcoin, miners use specialized mining hardware (ASICs) to compute the correct solution for the next block. If a valid solution is found by the miner, a new block is mined, and all the transactions contained within the block are validated on the blockchain.

Because validating transactions and securing the blockchain requires costly real-world resources, like energy and computing hardware, the miners are rewarded with the newly generated coins in the block they mined. Additionally, miners also receive the transaction fees from all the transactions they include. These rewards incentivize the miners to verify as many transactions as possible, and keep supporting the network