What Is a Coinbase?

Some cryptocurrencies, like Bitcoin (BTC), are mineable, meaning that they allow any user to contribute their computational power to securing the operation of the coin. The miners do this by collecting the most recent transactions that have taken place on the network, packaging them into blocks, securing these blocks with cryptographic hashes and adding them to the end of the blockchain.

As this process involves the expenditure of electricity and the operation of specialized equipment, mining is incentivized by the network by including a special transaction in every new block that sends a certain amount of newly “mined,” i.e. created coins to the person or organization that has mined that block. This transaction is called the generation transaction and the coins included in it are the coinbase of the block.

Bitcoin and many other mineable coins use the unspent transaction outputs (UTXO) model: every transaction consists of inputs and outputs and the coins which are stored on addresses are not literal balances, but rather collections of outputs from all the previous transactions to this address. In this context, the coinbase is the input of the generation transaction, whose output of the same amount gets sent to the miner.

Bitcoin’s coinbase used to be 50 BTC at the launch of its network. This amount gets halved approximately every four years and as of November 2020, it is equal to 6.25 coins.