Block rewards might sound somewhat enigmatic at first, but they play a fundamental and crucial role in the realm of cryptocurrencies. Picture yourself as a miner, excavating for precious digital currency in the digital wilderness. When you successfully verify a new transaction block, a reward in the form of cryptocurrency lands in your coffers – this is the essence of "block rewards."

This reward structure consists of two parts: the block subsidy and transaction fees. The block subsidy, as its name suggests, resembles freshly minted gold coins, forming the bulk of the block reward. Upon adding a new block to the blockchain, the system creates a predetermined amount of new currency out of thin air, rewarding the miner's efforts. These new coins emerge through a unique transaction called the "coinbase transaction," typically positioned as the first transaction in the block, magically conjuring currency from nothingness with an input source that is essentially void.

Transaction fees, on the other hand, are tips paid by all transactions within the block to the miner to expedite their confirmation. While discussions often emphasize block subsidies, transaction fees are a significant, albeit sometimes overlooked, component of the block reward, especially as we progress beyond the early stages of cryptocurrencies like Bitcoin, where subsidies diminish over time. Their importance grows as the subsidy reduces.

Taking Bitcoin, the pioneer of cryptocurrencies, as an example, it was designed with a unique rule – the Bitcoin Halving. Every 210,000 blocks mined, approximately every four years, the number of bitcoins generated per new block is halved. This mechanism guarantees that the total supply of bitcoins will never exceed 21 million, thereby controlling inflation and preserving the currency's value. Since Bitcoin's inception, several halvings have occurred: reducing from 50 BTC to 25 BTC in 2012, then to 12.5 BTC in 2016, and most recently to 6.25 BTC in 2020.

Over time, as Bitcoin continues to halve and block subsidies dwindle towards zero, transaction fees will become the predominant source of income for miners. This necessitates that the entire network adapts, improving transaction efficiency, lowering costs, and ensuring miners remain incentivized to maintain network security even without substantial new coin outputs.