Bitcoin mining is the critical process that secures the network and creates new bitcoins. At its heart lies a compelling incentive system: the block reward. This reward is how new bitcoins enter circulation and how miners are compensated for their substantial computational effort and energy expenditure. Understanding this mechanism is key to grasping Bitcoin's economic model.

The primary reward for a miner who successfully validates a new block of transactions is a predetermined amount of newly minted bitcoin. This is known as the "block subsidy." When Bitcoin launched in 2009, this reward was set at 50 BTC per block. However, Satoshi Nakamoto, Bitcoin's creator, encoded a rule known as "halving" into the protocol. Approximately every four years, or after 210,000 blocks are mined, this subsidy is cut in half. This deflationary schedule controls the supply, mimicking the extraction of a scarce resource. We have seen several halvings, with the block subsidy dropping to 25 BTC, then 12.5 BTC, 6.25 BTC, and most recently to 3.125 BTC. The next halving is anticipated in 2028.

Beyond the newly created coins, miners also collect all transaction fees from the transactions included in their newly mined block. When users send bitcoin, they can attach a fee to prioritize their transaction. These fees are not mandated by the protocol but are offered voluntarily to incentivize miners to include the transaction in the next block. As the block subsidy continues to halve over decades until it eventually reaches zero around the year 2140, these transaction fees are designed to become the miners' main source of revenue. This ensures the long-term security of the blockchain even after new coin issuance ceases.

The process of earning these rewards is highly competitive. Miners across the globe use specialized hardware (ASICs) to trillions of cryptographic calculations per second, racing to be the first to solve a complex mathematical puzzle. This proof-of-work system requires immense electricity and computational power. The first miner to find a valid solution broadcasts the new block to the network. Other nodes then verify the block and its transactions. Once consensus is reached, the winning miner receives the block reward, which is deposited into a pre-specified Bitcoin address of their choosing.

The reward system is ingeniously self-regulating. The Bitcoin network automatically adjusts the difficulty of the mining puzzle approximately every two weeks to ensure that a new block is produced, on average, every ten minutes, regardless of the total global mining power. If more miners join the network, competition increases and the difficulty rises. If miners drop out, the difficulty adjusts downward. This keeps the issuance of new bitcoins predictable and aligned with the original schedule, a cornerstone of Bitcoin's value proposition as "digital gold."

In summary, Bitcoin mining is rewarded through a combination of newly minted bitcoins (the block subsidy) and aggregated transaction fees. This reward is paid to the miner who successfully secures the next block in the chain through proof-of-work. The halving mechanism ensures a controlled, diminishing supply, while transaction fees are poised to sustain network security in the far future. This elegant incentive structure is what keeps the decentralized Bitcoin network running smoothly, securely, and without the need for a central authority.