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I know that when a miner mines a block, he will be rewarded with some bitcoins. But who decides how much bitcoin he will get? If it is decided by all the miners (as they are the ones verifying transactions) then why don't all the miners decide to increase the reward?

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When the creator of Bitcoin published the original Bitcoin client, it came with rules for an inflation schedule. As a means of bootstrapping the system and distributing the initial supply, miners were allowed to create 50 new bitcoins per block, but this subsidy would get halved every 210,000 blocks. The inflation schedule is a so-called consensus rule which is enforced by every single full node in the network. If any miner creates a larger amount, all other network participants recognize the block to be invalid and reject it. This happened once in July 2019 when a miner accidentally tried to create more new bitcoins than the allocated subsidy. You can think of the consensus rules as the least common denominator that keeps various implementations converging onto same ground-truth in the decentralized Bitcoin network. As they are so central, changes to consensus rules tend to meet resistance and it can take years to establish support for amendments.

Miners do have an important role in the Bitcoin network, but if a cabal of them unilaterally stopped adhering to the consensus rules, they would simply no longer get paid: newly minted coins can only be spent at the earliest 100 blocks after they were created, and only in a block that directly derives from the block that created the funds. As seen in above mentioned incident, even a single block with an excessive block subsidy was a major news item when it happened. It is extremely unlikely that the greater ecosystem would go along with it, and that means there is no market to sell the coins, meanwhile every block comes at an actual cost.

Incidentally, we happen to be close to third subsidy halving: In approximately 16 days, at block 630,000, the block subsidy will halve to 6.25 bitcoins per block. This happened twice before, in 2012 the subsidy halved to 25 bitcoins, and in 2016 the subsidy halved to 12.5 bitcoins per block.

Related reading:

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  • Ok I got some of it, but as bitcoin is completely decentralized and nobody has control over it then what enforces every node to stick to that reward? – Shivam Goyal Apr 26 at 6:07
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    I've added a few more thoughts which might cover that, but essentially the problem is that it's hard to convince tens of thousands of individual node operators to change the software they're running when that is to their detriment. It's simply impractical for miners to attempt changing the rules to their benefit at the cost of the whole network. – Murch Apr 26 at 6:12
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    I think the important point is that nothing is forcing anyone to stick to these particular rules, but anyone who picks other rules is instead creating their own network, with its own (forked-off) currency, unable to interact with those using the original rules. There is nothing wrong with this, either - people choose to follow these rules because there is value in following them (if nothing else, network effect). – Pieter Wuille Apr 26 at 6:56

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