Block Rewards

https://player.vimeo. com/video/674782952

The coinbase outputs pay the ‘block reward’ to the node operator or other selected receivers.

The outputs of the coinbase transaction must contain equal or less satoshis than the sum of two values:

1. Transaction fees

In order to get a transaction recorded on the ledger, users pay a small fee to miners. The fee paid is the difference between the value of the inputs to a transaction and its outputs. That difference is added to the coinbase transaction as part of the block reward. As the network scales to accommodate more transactions, this amount grows in value. Long term, this portion of the reward becomes the primary incentive driving nodes to participate in the process of building blocks.

1. The Block Subsidy

The Block Subsidy is the algorithmically defined distribution of Bitcoins to nodes over time. The schedule at which the subsidy would allocate the Bitcoin supply to miners was set when the Bitcoin network began operating in 2009. The subsidy started at 50 Bitcoins, or 5,000,000,000 Satoshis, and reduces by 50% every 210,000 blocks, or approximately every 4 years. This schedule steadily decreases until it reaches zero after 32 ‘halving’ events, estimated to end in approximately 2140.

https://player.vimeo. com/video/675791814

The subsidy gives Bitcoin nodes something to compete for during the early phases of the network’s growth. At this point within the network, the cumulative transaction fees do not amount to much due to the low fees and very low traffic on the network. However as stated in the whitepaper, transaction fees are the longer term incentive:

“Once a predetermined number of coins have entered circulation, the incentive can transition entirely to transaction fees and be completely inflation free.”