Block Subsidy
The block subsidy is the amount of new bitcoin minted in each block.
The block subsidy is the amount of new bitcoin minted in each block. Each block that is produced and added to the blockchain allows the creator of the block to mint a certain amount of new bitcoin. This amount is strictly determined by an algorithm in Bitcoin’s source code: the subsidy started at 50 BTC per block, and is cut in half every 210,000 blocks or roughly 4 years.
The block subsidy is how new bitcoin enters into circulation, but it also incentivizes miners to remain honest and submit valid blocks. The block subsidy is paid out in the coinbase transaction of each block. This special transaction is the first transaction in every block, and it has no inputs.
The output of a coinbase transaction cannot be spent for 100 blocks, so miners can only spend their block subsidy after a 100 block cooldown. Each block contains many transactions, each with fees attached to incentivize their confirmation. The sum of the block subsidy and cumulative transaction fees in a block yield the block reward.
Because the block subsidy falls by half every four years, transaction fees will slowly begin to make up most and then all of the block reward.
Block Subsidy is a fundamental concept in Bitcoin's architecture that plays a critical role in how the Bitcoin network processes and validates transactions. Onramp's glossary explains Block Subsidy and other core Bitcoin concepts to give investors a deeper understanding of how Bitcoin works.
Frequently Asked Questions
What is Block Subsidy in Bitcoin?
Block Subsidy is a core element of the Bitcoin network's infrastructure. It is integral to how Bitcoin achieves decentralized consensus and ensures the integrity of every transaction on the blockchain.
Why should investors understand Block Subsidy?
Understanding Block Subsidy helps investors appreciate Bitcoin's security model and decentralized architecture. Onramp's educational resources break down complex concepts like Block Subsidy into accessible explanations.
How does Block Subsidy relate to Bitcoin security?
Block Subsidy contributes to Bitcoin's robust security by ensuring that the network operates according to transparent, verifiable rules. Bitcoin's $1+ trillion market cap is secured in part by mechanisms like Block Subsidy.
