something interesting today. Many people think Midnight block producers get the full block reward, but that’s not how the mechanism works.
Under Midnight’s design, every block reward is made up of two parts: a fixed subsidy and a variable component.
The block producer always receives the fixed subsidy. The variable part only changes based on how full the block ends up being.
If the block reaches full capacity, the producer collects the full variable share.
A completely full block means the producer keeps the entire variable portion. If the block is half full, the variable reward is split between the producer and the treasury. And if the block is empty, the producer only receives the fixed subsidy while the treasury collects the whole variable share.
When the network launches, the subsidy rate starts at 95%. In simple terms, producers receive 95% of the block reward regardless of block usage, while only 5% depends on block activity. This setup helps support producers during the early phase when transaction volume is still limited.
The design gradually lowers the subsidy rate to around 50%. Once it reaches that level, half of every block reward will be tied directly to transaction volume, making empty blocks significantly less attractive for producers.
The real question is what happens when the subsidy drops. Will producers start filling blocks with their own transactions just to capture the variable rewards?
@MidnightNetwork #night $NIGHT
