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From what I understand, CREATING a block to confirm or verify transactions is hard work, and is rewarded with 25 bitcoins, or something like $12,325 (depending on the daily exchange rate). But how do the economics change afterward?

Is it a case of "high fixed costs (to create the block), low variable costs (to follow the path of a particular set of bitcoins)? Suppose you take a single bitcoin and carve it up for numerous smaller transactions? Is this economically feasible because the forward-going costs are low after you've absorbed your fixed costs creating the block? Or is this kind of transaction where confirming it is likely to cost more than the transaction is worth?

Edit: In searching the literature on the site, what is described in the paragraph 2 appears to be the case. This link, explains how a person earns 25 bitcoins creating a block. What does a person do to earn the .03334571 bitcoins (about $16) as a commission in this link?

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Mining a block (also called confirming) is not dependent upon the number of transactions in the block. A block with a single transaction is just as hard to mine as one with 1,500 and earns you the same reward.

In addition to the reward, miners can claim a fee, which practically is the difference between the sum of the inputs and the sum of the outputs. The rule to compute whether a fee is required can be a little complicated. The person issuing the transaction is free to include a fee or not but a transaction that doesn't may not get confirmed.

Finally, the mechanism by which reward and fees are claimed is by inserting a transaction in the block, in the first position, that sends the total amount to the miner's public address. The network validates it with all the rest.

  • Welcome to the site. An upvote for a good answer. – Tom Au Apr 29 '14 at 22:38

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