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To compensate the miner who could solve the PoW as the first one, they will receive some bitcoins as a reward for keeping them motivated due to the costs related to mining process (electricity and hardware).

Does this reward include both following parts?

  1. Newly minted bitcoins.
  2. Transactions fees included in winner's block.

If yes, the second part seems logical and the coins can be provided simply through the account of the participants who submitted the transactions.

However, concerning the first part i.e. "newly minted bitcoins",

(a) What is the reason to add this complementary reward?

(b) How are those new coins minted? And how to calculate the amount of those new coins?

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What is the reason to add this complementary reward?

The answer can be found in the original 2008 Bitcoin Whitepaper by Satoshi Nakamoto:

6. Incentive

By convention, the first transaction in a block is a special transaction that starts a new coin owned by the creator of the block. This adds an incentive for nodes to support the network, and provides a way to initially distribute coins into circulation, since there is no central authority to issue them. The steady addition of a constant of amount of new coins is analogous to gold miners expending resources to add gold to circulation. In our case, it is CPU time and electricity that is expended.

The incentive can also be funded with transaction fees. If the output value of a transaction is less than its input value, the difference is a transaction fee that is added to the incentive value of the block containing the transaction. Once a predetermined number of coins have entered circulation, the incentive can transition entirely to transaction fees and be completely inflation free.

The incentive may help encourage nodes to stay honest. If a greedy attacker is able to assemble more CPU power than all the honest nodes, he would have to choose between using it to defraud people by stealing back his payments, or using it to generate new coins. He ought to find it more profitable to play by the rules, such rules that favour him with more new coins than everyone else combined, than to undermine the system and the validity of his own wealth.

In the beginning, every Bitcoin wallet was a miner. Every active Bitcoin participant was financially rewarded in order get the Bitcoin community to quickly grow to a sustainable size. After some years, the difficulty of mining increases (deliberately) and mining has become a specialised activity.


How are those new coins minted? And how to calculate the amount of those new coins?

ecavero's answer covers this well.

This reward is part of the network consensus rules. Miners follow these rules and every full node (including many wallets) verifies the correctness of published blocks, discarding blocks that don't follow the rules.

See also


is there any documentation for this information (ex. 210,000 blocks, after 100 confirmations etc)?

According to Bitcoin Wiki - Controlled Supply

Satoshi has never really justified or explained many of these constants.

...

Speculated justifications for the unintuitive value "21 million" are that it matches a 4-year reward halving schedule; or the ultimate total number of Satoshis that will be mined is close to the maximum capacity of a 64-bit floating point number.

...

This decreasing-supply algorithm was chosen because it approximates the rate at which commodities like gold are mined.

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(a) What is the reason to add this complementary reward?

Well, you must ask yourself what happens on the very first block; i.e. at the Genesis block.

Where would the transactio fees come from if there where no bitcoin? So, part of the reward is newly created bitcoin.

(b) How are those new coins minted? And how to calculate the amount of those new coins?

Every miner constructs candidate block and selects pending transactions from the mempool and fills this block with them. On top of these transactions, the miner himself creates a transaction (called the coinbase) which has no inputs and one output which has 12.5 new bitcoin + fees which will go to the address the miner picks. Once he finds PoW, he broadcasts the block to other nodes to validate. After 100 confirmations, the miner can spend the reward. Remember that only blocks which have PoW for the current difficulty is considered a valid block.

Now, since the first block, the reward was 50 bitcoin. Then, after 210 000 blocks, the reward was reduced by half to be 25 bitcoin. Today, the reward is 12.5, and sometime in May, it will be 6.25

Hope this helps.

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  • It helped for sure, but some things yet remain unclear: (1) apparently after each 210,000 blocks the amount of newly minted coins for miner's reward will be divided into 2, but why after 210,000 blocks, and why divided into 2 ? (2) This complementary reward was logical when genesis block was created, but why remained after that, when now always there is a previous block? Thanks – Questioner Mar 2 at 15:09
  • And the last one: What does "100 confirmations" mean? Does it mean adding 100 new blocks over the miner's block ? Thanks – Questioner Mar 2 at 15:19
  • Exactly. 100 confirmations mean miners solved 100 blocks after the miners block. – ecavero Mar 2 at 15:23
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    The choice of 210 000 blocks and the "halvening" (as it is called) are arbitrary. Satoshi modeled the mining of bitcoin to be similar to the mining of gold. There is only a finite amount of gold on Earth and, hence, it gets harder to find. As we mine gold, there is less gold. As we mine bitcoin, there is less bitcoin! – ecavero Mar 2 at 15:26
  • Thanks. And, is there any documentation for this information (ex. 210,000 blocks, after 100 confirmations etc)? Thank you again. – Questioner Mar 2 at 15:29

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