Uncle Block Rewards

Uncle block rewards refer to the incentives received by miners for creating and validating uncle blocks on the Ethereum blockchain. It is more common in the Proof-of-work (PoW) protocol. The purpose of this reward is to incentivize miners to verify the transactions and validate the block.

The Ethereum uncle block rewards are a result of ommer blocks present on the blockchain. When two blocks are mined simultaneously, only one block gets added to the chain. As a result, the other block acts separately despite being validated. Hence, the block reward acts as a gain to the miner for the validation done. 

Uncle block rewards were an essential component of the Ethereum blockchain that rewards miners for creating and validating uncle blocks on the chain. It is a method of incentivizing them for the validation performed. In short, it is directly related to the presence of uncle blocks. If there are ommer blocks on the blockchain, the miners creating and verifying them have a chance to receive this reward. However, the extinction of uncle blocks also vanishes the uncle block rewards for them. And it is true to the current scenario. 

The existence of the Ethereum Uncle block rewards started in 2017. At that time, there were 310,542 uncles. They were a result of the fork created, and in return, 1/32th is given as a reward. In 2017, the average uncle block reward was 0.725. However, the range of this reward depends on the work performed. 

There are two types of rewards given for uncle blocks, namely, uncle reward and uncle inclusion reward. Uncle reward exists when the miner creates a block and is ready to get added to the blockchain. During that stage, the blockchain rewards them for verifying transactions and adding the block. They receive 1.75 ETH for validation done. But, if it happens after three blocks, the reward reduces to 1.25 ETH. However, it is different for uncle inclusion rewards. 

Uncle inclusion reward is entitled to those miners who again include an uncle block in the confirmed chain. If the inclusion occurred immediately, the average block reward is 7/8th of the value or 0.0625 ETH. But, if the same thing happens after six blocks, the reward drops to 2/8th. 

The calculation of the uncle block rewards seems complex and procedural. However, it involves simple steps and formulas for finding the value received for adding the uncle blocks on the blockchain. Let us look at the equation for this reward:

Uncle block reward = * Block reward / 8

Here:

• Block number refers to the height of the block that includes the reference to the uncle block.
• Uncle block number refers to the height of the uncle block itself.
• The block reward is the reward given for mining a main block, which was 2 ETH before the transition to Proof-of-Stake.

For example, if the uncle block number is 15537297 and the block number (block height) that includes the uncle is 15537298, then the reward for the uncle block would be calculated as follows:

Uncle block reward = (8−(15537298−15537297))∗2 ETH/8

• = (8−1)∗2/8Uncle block reward=(8−1)∗2/8
• = 7∗2/8Uncle block reward=7∗2/8
• =14/8=1.75 

So, the reward for the uncle block in this example would be 1.75 ETH.

Let us look at some examples of uncle block rewards to comprehend the concept better:

Example #1 

Suppose Carol is a crypto trader who has been dealing with digital coins for more than five years. At the same time, she also has ample knowledge of blockchain technology. Thus, with the use of her computer, she started playing the role of a miner on the chain. After a few years, Carol could successfully mine blocks and add them to the blockchain. However, there was an issue in the Ethereum protocol. 

In short, Carol noticed that the chain had a divergence containing some uncle blocks. And some of them were indeed mined by Carol. At the moment, she had three uncle blocks visible on her screen, so she decided to add them back to the blockchain. Let us look at the following calculation of uncle block rewards:

Block 1 = (437789 + 8 - 437790) x 2/8   =  1.75 ETH

Block 2 = (523378 + 8 - 523390) x 2/8  = 1.5 ETH

Block 3 = (767763 + 8 - 767766) x 2/8  = 1.2 ETH

Here, Carol received a total of 4.45 ETH as a reward for adding these blocks again to the blockchain. 

Example #2

Suppose Kevin, a miner, and validator on the blockchain, had recently begun this work of validation. He had successfully added 300 blocks to the chain. However, this time, there was a glitch. Kevin verified transactions and added them to a block, but simultaneously, another miner was also adding their block. In the competition to add their respective blocks, the protocol accepted the other miner's block. Despite this, Kevin received a reward of 2 ETH for his efforts.

Although uncle blocks have no position in the blockchain, they do have some role to play in it. In other words, the rewards generated from these blocks do benefit the selfish miners and mining associated with them. A selfish miner is a validator who tries to control the incentives and rewards generated from the blockchain. However, they do cause attacks in the blockchain. Some of the consequences of these blocks are as follows:

• The selfish miner may try to mine a block on top of another block. It is done with the intention of creating a secret fork and making it invisible for a specific time. When the secret fork turns long, the miner reveals it, and later, it is considered the main chain. In short, the aim remains not to extend the public blockchain. 
• Secondly, the revenues or rewards for a selfish miner increase when the uncle blocks inclusion. It provides a better opportunity for higher rewards than including the stale blocks. In other words, it gives partial rewards rather than receiving none. 
• Also, the concept of uncle blocks rewards reduces the possibility of selfish mining becoming successful in the Ethereum blockchain. However, that is different for Bitcoin-based selfish mining.