What Is The Block Subsidy?
The Block Subsidy is the amount of new bitcoin that is created in each block and awarded to the miner that finds the block.
The block subsidy plus the transaction fees are what makes up the block rewardWhat Is The Block Reward? The block reward is how Bitcoin miners are compensated for mining and adding blocks of transactions to the blockchain. The block reward is made up....
Every 210,000 blocks, the subsidy is reduced by 50% in an event commonly known as the halving until all 21,000,000 Bitcoin have been mined. The block subsidy is estimated to come to an end sometime in the year 2140.
Coinbase Transaction
In order to compensate bitcoin miners for providing proof of workWhat Is Proof Of Work? Proof Of Work, often abbreviated as PoW, is both the method for achieving consensus across the entire Bitcoin network as well as a piece of..., they receive a block reward for each block that they mine. The block reward is made up of both the block subsidy and the transaction fees which is paid out in the first transaction of every block called the coinbase transaction.
The coinbase transaction is the first transaction in every block and is how the supply of all new Bitcoin are issued.
The Halving
Every 210,000 blocks, the subsidy is reduced by exactly 50% in an event commonly known as The Halving.
The halving ensures the slow reduction of new bitcoin that are created. It also gradually transitions miners to being paid entirely from transaction fees. Over time, the block subsidy will make up a smaller percentage of the total block reward and transaction fees will make up a larger percentage. Once all 21 million bitcoin have been mined, the subsidy will no longer exist and miners will be paid entirely from transaction fees.
The Block Subsidy Is Disinflationary
Contrary to popular belief, Bitcoin is not deflationary. It is actually disinflationary which is the gradual slowing of the supply of new bitcoin.
Unlike fiat monetary policy, the supply of new bitcoin (monetary inflation) is not arbitrarily decided on by a board of directors at a central bank. Instead, the supply is mathematically reduced on a fixed schedule.
Every 210,000 blocks (about 4 years), bitcoin inflation is cut in half. This is why the name “halving” comes from. Instead of inflation being fixed at a certain percentage annually, Bitcoin’s rate of inflation slows down on a fixed schedule that is enforced by the bitcoin nodesWhat Is A Bitcoin Node? A bitcoin node is any computer that runs the bitcoin software, enforces the bitcoin consensus rules, and validates bitcoin transactions and blocks. Bitcoin nodes are... in accordance with the bitcoin consensus rulesWhat Are The Bitcoin Consensus Rules? The Bitcoin consensus rules are the set of rules that all of the bitcoin nodes agree on that govern and maintain the Bitcoin protocol.....