clock menu more-arrow no yes

What incentive do people have to help process Bitcoin transactions?

Shutterstock

Bitcoin’s rules allow the person who adds a block to the blockchain to award some bitcoins to himself. Currently, the creator of each block gets 25 bitcoins, worth around $10,000. Because this is how new bitcoins are introduced to the system, the process is known as mining and the participants are known as miners.

Bitcoin miners compete for this lucrative honor by racing to solve a difficult mathematical problem. The difficulty of the problem adjusts automatically to ensure that it is solved (and a new block created) at an average rate of once every 10 minutes.

The size of the reward miners get for creating new blocks will halve approximately every 4 years: in 2016, the block reward will fall from 25 bitcoins to 12.5 bitcoins. As a result, there will never be more than 21 million bitcoins.

Miners are rewarded in another way too: Bitcoin users can attach a transaction fee to a payment as an incentive for miners to process it quickly. As the volume of Bitcoin transactions grows, these fees should gradually replace the declining per-block reward.