Comment: This is a bit complicated so bare with me.

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In reply to comment: What is the "Block Reward" (see in situ)

This is a bit complicated so bare with me.

I'll explain it with an analogy:

Imagine that every "Bob sends 1 bitcoin to Alice" transaction is an envelope. What Bitcoin mining is is listening to the Bitcoin peer to peer network for any new envelopes flying around and gathering them. At the same time you're gathering all these new envelopes you're trying to bundle them up into a package and tie a nice bow on it. To tie a bow you have to solve a math problem, and the solution to that math problem is the fabric that will give the bow the right shape, a shape everyone else in the network will recognize as following the rules of Bitcoin.

So, many people are doing this, they are gathering up all these new envelopes(transactions) and trying to tie a bow on the new package. Who ever is first to successfully tie a bow on the next new package, gets to send this package to everyone else in the network. They also automatically insert their own special envelope that isn't coming from anyone but is addressed to them with a reward of X bitcoins (was 50, now is 25) for doing all of this and that is the block reward and it's how all bitcoins will be issued.

When the rest of the network receives his package they check the bow and the contents of the package and if the package looks like it's following the Bitcoin rules they add a copy to their chain of packages they already received and if it doesn't they simply ignore it, hence why no one can cheat in Bitcoin and issue themselves more bitcoins then allowed by the code.

Then everyone tries to bundle up all the next new envelopes that aren't included in any of the packages yet into a new package of their own again and thereby starting a new round of competing for the reward for successfully doing so.

The reason this is done so is because Bitcoin is decentralized. If you have a central authority that keeps track of all the envelopes(transactions) you don't need this complicated system. But because Bitcoin is decentralized this is the only way yet discovered how it can work and it does work very well. Instead of a post office keeping track off all packages and deciding how much new bitcoins are issued, everyone part of the network is doing it, and everyone is issuing the new bitcoins through this lottery of tying a bow on the package. And that math problem is analogous to a lottery because it's random who solves it first although the faster your computer the higher your chances.. Also it's difficulty is dynamic meaning that if more people participate in the lottery it self adjust and gets harder to win it so that there is an insured constant rate of 1 new package added to the chain every 10min on average.

And to answer your other question, all of this, the difficulty, how the bow must look like, the reward amount, when it's being cut in half was decided and embedded in the code of Bitcoin and cannot be changed anymore because to do so, you'd need to convince everyone part of the network to download a new version with new rules, which is pretty hard but more like next to impossible given that it's open source and anyone can read the entire code.

I hope this makes sense, if not I'll try again.