Understanding Coinbase in Cryptocurrencies

In the world of cryptocurrencies, such as Bitcoin (BTC), mining is a process where users contribute their computational power to secure the network.

Miners gather the most recent transactions, bundle them into blocks, secure these blocks with cryptographic hashes, and add them to the blockchain.

Mining is incentivized by including a special transaction, known as the generation transaction, in every new block. This transaction sends a certain amount of newly created coins, called the coinbase, to the miner who successfully mines the block.

The coinbase transaction serves as a reward for the miner’s contribution to electricity and specialized equipment.

Coins that are mineable, like Bitcoin, typically use the unspent transaction outputs (UTXO) model.

In this model, transactions consist of inputs and outputs, and the coins stored in addresses represent collections of outputs from previous transactions to that address.

The coinbase is the input of the generation transaction, with an output of the same amount sent to the miner.

At the launch of the Bitcoin network, the coinbase amount was 50 BTC. However, this amount undergoes a halving event approximately every four years.