Coinbase Transaction

A coinbase transaction is the special first transaction in every block on Bitcoin and similar proof-of-work blockchains. It is created by the miner who builds the block and is the only transaction allowed to create new coins: it pays the miner the block reward set by the protocol plus all the fees from the other transactions in the block. Unlike ordinary transactions, it does not spend any existing coins, so it has no real inputs.

The term predates the exchange company Coinbase, which took its name from it. It is also sometimes called the generation transaction. On Ethereum, the word "coinbase" was used for the address that receives a block's fees, but Ethereum does not use a coinbase transaction in the same way. The coinbase transaction is how all bitcoin in existence was originally created, and it is the mechanism that enforces the issuance schedule described under Bitcoin halving.

Think of each block as a page in a shared accounts book. Most lines on the page record money moving from one person to another. The first line is different: it is where the person who completed the page writes down their own reward. That line creates brand-new coins, out of nothing, plus the tips that everyone else on the page paid.

The rules strictly limit what that first line may say. If a miner writes in even slightly more than they are allowed, every other computer on the network rejects the whole page. And the reward cannot be spent straight away; it has to wait until about a hundred more pages have been added, in case the page is replaced.

A coinbase transaction follows special rules:

• One per block, first. Every block must contain exactly one coinbase transaction, in the first position.
• Null input. Its single input points to no previous output. In place of a signature it carries the coinbase field, up to 100 bytes of data the miner can fill freely.
• Limited output. The outputs may not exceed the block subsidy plus total fees. A miner can claim less, in which case the difference is lost forever.
• Block height. Since a 2012 upgrade, the coinbase field must begin with the block's block height, which ensures every coinbase transaction is unique.
• Maturity. Coins created by a coinbase transaction cannot be spent until 100 more blocks have been added, guarding against loss if the block is dropped in a chain reorganization.

Since the Segregated Witness upgrade of 2017, the coinbase transaction also carries a commitment to the block's witness data in one of its outputs.

The free data area has several practical uses. Miners and mining pools put an extra counter there, often called the extranonce, to widen the search when the block header's own nonce has been exhausted. Pools also add identifying tags, which is how researchers estimate which pools mined which blocks. During upgrades, miners have used the field to signal support for proposed rule changes. The best-known message is in the genesis block, mined by Satoshi Nakamoto in January 2009, which carries a London newspaper headline from 3 January 2009 about a second bank bailout. The 50 bitcoin in that first coinbase output cannot be spent under the software's rules.

Before the block-height rule existed, two pairs of coinbase transactions in 2010 ended up with identical transaction IDs, because their contents were the same. In each pair, the later transaction effectively overwrote the earlier one, making 50 BTC unspendable in each case. A rule added in 2012 blocked any repeat of this, and the block-height requirement later made duplicate coinbase transactions impossible in practice. The coinbase's spending delay also explains why newly mined coins appear in a miner's wallet as "immature" for a time.

As the block subsidy halves roughly every four years, a growing share of each coinbase transaction comes from fees rather than new coins. Researchers watch this mix closely, since Bitcoin's long-term security budget will depend on fees once the subsidy approaches zero around 2140. Some researchers argue that fee income alone may not be enough to keep mining secure, while others expect fees to rise as block space becomes scarcer and more valuable. Further detail is given under Mining Reward.