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Separate issuance from miner income
Useful first : Bitcoin mining and difficulty
Reading path · 6 / 41 · Intermediate
The first transaction in a block, called the coinbase transaction, lets the miner claim the permitted subsidy and transaction fees.
The essentials
The first transaction in a block, called the coinbase transaction, lets the miner claim the permitted subsidy and transaction fees. It need not involve the company sharing that name. The subsidy halves every 210,000 blocks; calendar dates are estimates.
How it works
The scheduled issuance approaches slightly less than 21 million BTC. Lost funds remain in the record but may never be spendable again. Maximum supply, issued supply and economically available supply therefore measure different things. Market capitalisation usually uses an estimated circulating quantity rather than counting every recoverable coin.
What to watch
As subsidies shrink, fees become a more important source of miner revenue. Long-term security depends partly on demand for block space and production costs. Programmed scarcity does not establish a market price, ensure liquidity or guarantee investment returns. Evaluate the monetary rules separately from assumptions about future demand.
Understand the details
The block subsidy introduces new bitcoin according to consensus rules, while transaction fees transfer existing bitcoin. A miner’s gross block revenue combines both. Halving reduces the subsidy at a specified block-height interval; it does not halve user balances or mechanically double the market price. Calendar estimates depend on actual block production.
Boundaries and common mistakes
A supply rule is not a forecast of demand. Lost keys can make coins inaccessible without deleting their historical issuance. Miner profitability also depends on energy, equipment, financing and competition. Long-term security discussions must distinguish protocol accounting from uncertain future market conditions.
The mechanism at a glance
- 01Subsidy: new coins
- 02Fees: existing coins
- 03Combined block revenue
- 04Costs determine profit
Read these as connected concepts, not necessarily consecutive steps.
Read the explanation
The block subsidy introduces new bitcoin according to consensus rules, while transaction fees transfer existing bitcoin. A miner’s gross block revenue combines both. Halving reduces the subsidy at a specified block-height interval; it does not halve user balances or mechanically double the market price. Calendar estimates depend on actual block production.
Put the mechanism into context
In a fictional system, a block pays a subsidy of 4 units and fees of 1 unit. After a halving, assume fees remain 1. Build a before/after table for new issuance, transferred fees and total producer revenue. These numbers are illustrative, not Bitcoin’s current subsidy.
Apply it in the workshop →What this mechanism does not guarantee
A supply rule is not a forecast of demand. Lost keys can make coins inaccessible without deleting their historical issuance. Miner profitability also depends on energy, equipment, financing and competition. Long-term security discussions must distinguish protocol accounting from uncertain future market conditions.
The distinction that changes the analysis
In a fictional block, a subsidy of 3 units and fees of 0.4 units produce 3.4 units of miner revenue before costs. Only the subsidy is new issuance. Fees transfer existing value; do not count the entire revenue as new monetary supply.
Explain it yourself
Revisit the case above. Name what is established, what remains to be checked and the evidence needed to conclude. A strong answer addresses both sides of the diagram.
Apply the lesson to a case
In a fictional system, a block pays a subsidy of 4 units and fees of 1 unit. After a halving, assume fees remain 1. Build a before/after table for new issuance, transferred fees and total producer revenue. These numbers are illustrative, not Bitcoin’s current subsidy.
It falls from 5 to 3 units, a 40% decline, while issuance falls by 50%. Fees did not create new units. Repeat with fees of 3 units after the halving to see how a different fee assumption changes revenue without changing the issuance rule. Neither scenario predicts real future fees.
Prepare a correction note
Describe the passage and the proposed correction. This creates a local note for you to share; it sends nothing. Do not include personal or confidential information.