Block Subsidy
Learn what a block subsidy is, how miners receive new coins, and why subsidy changes affect revenue.
Definition
A block subsidy is the new cryptocurrency created by a protocol and paid to the miner who successfully adds a valid block. It is one part of the total block reward, separate from transaction fees paid by users. In proof-of-work networks, the subsidy helps issue new coins and pay miners for securing the chain.
How It Works
When miners build a candidate block, they include a special first transaction called the coinbase transaction. This transaction creates the allowed subsidy and assigns it to the miner or mining pool that found the block.
The subsidy amount is set by the network’s rules, not by the miner. If a miner claims too much, other nodes reject the block as invalid. This makes the issuance schedule enforceable by the whole network.
Bitcoin is the best-known example. Its subsidy began at 50 BTC per block and falls by half every 210,000 blocks in an event called a halving. After the 2024 halving, the Bitcoin subsidy became 3.125 BTC per block. Other cryptocurrencies may use fixed rewards, gradual reductions, or protocol upgrades.
The subsidy is not the same as the full miner payment. A miner may also collect every valid transaction fee in the block. So the total reward equals the block subsidy plus fees.
Why It Matters
For miners, the block subsidy is a major source of revenue. It helps pay for ASIC miners, electricity, cooling, maintenance, and other costs. When the subsidy falls, miners usually need higher coin prices, lower power costs, more efficient hardware, or higher fees to keep the same margin.
The subsidy also affects competition. A large subsidy can attract more miners and increase total hash rate, which can strengthen security. A smaller subsidy can pressure inefficient miners to shut down, especially if market prices are weak.
For the network, the subsidy controls new supply. In Bitcoin, repeated halvings make issuance more scarce over time and move miner income gradually toward fees. This is why subsidy changes are central to mining economics and supply policy.