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What is a coinbase transaction?

What is a coinbase transaction?

A coinbase transaction is an origination of value for satoshis in the Bitcoin cryptocurrency. Miners produce blocks, for their reward in Bitcoin, as redeemed in the form of the coinbase in that block.

Transcription

Ahoy, party people! I am Chris DeRose and I am the community director of the Counterparty foundation. And in this video I wanted to address the question "What is a coinbase?" Or more aptly put "what is a coinbase transaction?" So in Bitcoin you need to understand that what we have is a Triple Ledger Accounting system. It's a little different than a Double Ledger Accounting system in that it involves transactions which are themselves expressed, in part, based on their inputs. Their inputs are other transactions. So if I spend let's say one Bitcoin I may choose to write this check for one Bitcoin. At this point my transaction is a check.

So I write this check and I take the one Bitcoin I allocated from some number of prior transactions that were addressed to me. I say that "okay half of this amount comes from a transaction that I received last month and the other half comes from a transaction I received this week." Those are the inputs to my transaction. I then write that transaction, I sign it, I enter it into the mempool, and from the mempool it gets compacted into a block every 10 minutes or the first 10 minutes as it may be. And then once it's in a block and actually even technically before, when it's in the mempool, it can then itself be referenced as the input to the next transaction. That's how it typically works when you're writing transactions in Bitcoin.

There's a fully auditable path of transaction after transaction where every amount came from. You know, there is a common misconception that a Bitcoin is like this solitary thing that you hand around but it's not exactly true. There are many satoshis that can be referenced in any given transaction but all those satoshis are accounted for from prior transactions. So there's this big ball of checks, upon checks, upon checks that make up the block chain. Now as you all may or may not know when miners mine a new block they are rewarded themselves in Bitcoin. The way that they are rewarded is typically for solving the block.

At the moment they are getting 25 Bitcoins per block. In the future that will be halved. It'll be twelve and a half, but when they form this block there is a base transaction. There is a coinbase transaction that itself is where that 25 BTC shows up. The coinbase isn't itself referencing any other transactions, it is a genesis transaction. It doesn't have any need to reference inputs because it was a newly minted Bitcoin and so those coinbases are typically what we see at the very start of all transactions.

You can take your Bitcoin and you can trace it all the way back at the time that it was originally minted. You can go back through every single confirmation that it took in order to get back to some coinbase that references your Bitcoin. It's not quite that simple because there's sort of fungibility in terms of where the Bitcoins get allocated after a point but you can get a rough idea and you can still get a statistical idea of where your Bitcoin came from but that's what a coin based transaction is. One of the reasons that the coinbase company has named it, I believe, is sort of a pun on the start or the origin of Bitcoin for people. It is itself a kind of play on words. A little self-referential, but that is what a coinbase transaction is.

Some people have speculated that coinbase transactions are more valuable than regular transactions because they themselves are probably or certainly the only and most anonymous form of Bitcoin that enters the network. If you're a miner and you received this coinbase it is at best tied to your IP address and never to any transactions prior. I don't necessarily believe that but it's a good point to be made. I mean it's conceivable that those would be worth more, but that's what a coinbase transaction is and so hopefully I answered that question. And if you have other questions why don't you ask it to me? You can reach me on Twitter my handle is derosetech, you can email me at chris@chrisderose.com and if you liked this video, subscribe to my channel.

Later, party people.