On a blockchain network, transactions are confirmed by computers called nodes.
The processes by which these nodes confirm transaction vary depending on which kind of algorithm the network runs on.
On a blockchain network that runs on a Proof-of-Work (PoW) algorithm, nodes solve incredibly complex mathematical equations in a process called “mining.”
In exchange for the mining that the nodes do in order to confirm transactions and add them to the main ledger, the nodes receive crypto tokens.
These tokens are known as the mining reward. Mining rewards are collected through the fees that transaction senders pay.
The most profitable way to mine Bitcoin is to own a large amount of expensive equipment and run what’s called a mining farm.
However, if you are a miner who only has access to a small amount of equipment, you can join a mining pool, which is a sort of collective made of smaller-scale miners.
Every time the pool that you are part of earns rewards, you receive a payout in accordance with the computing power you’ve provided.
Explaining Mining Rewards Using Bitcoin
The best example of a mining reward is. Bitcoin, which is only issued through mining.
The reward for mining a block began at 50 BTC. This reward is halved every 210,000 blocks, and the 6,929,999th block will be the last to reward mining.
Eventually, the total amount of Bitcoin to be issued is 21 million BTC, reflecting the maximum amount of Bitcoin that can be issued.
Rewards decrease as explained above, and the speed at which it is issued is adjusted so that one block is generated every 10 minutes.
It will take about 132 years to mine all 6,929,999 blocks, and the last block will be mined in 2140.