Coinbase is the special name given to the first transaction in every block. These can also be called ‘Generation Transactions’.
The winning miner creates this special transaction as part of the block templating process.
A coinbase transaction follows the same format as a normal transaction, except:
- It has exactly one txin
- This txin’s prevout hash is 0000…0000.
- This txin’s prevout index is 0xFFFFFFFF
- The txin’s prevout script is an arbitrary byte array which has historically been used by miners to signal identity and pass messages from block winning nodes to the rest of the network
- The sum of the txout’s values cannot exceed the total of the current Miner subsidy plus the mining fees paid by all other transactions included in the block
A part of the coinbase is also used as an ‘extra nonce’ during the block discovery process due to a single ASIC miner being able to test more combinations than allowed for in the 2^32 possible combinations that changing the nonce in the block header can create. The extra nonce field is incremented and the merkle root updated to generate a further 2^32 possible block hashes to try.
The winning miner can pay the coinbase value to multiple outputs as needed, and is also free to include zero value OP_FALSE OP_RETURN outputs in the transaction.
Prior to [BIP 0034] the coinbase script size was between 2 and 100 bytes. Since the smallest number of bytes required to store the current Block Height is 1 byte for the length and 3 bytes for the value, a minimum of 4 bytes are required to store the block height. Therefore, post [BIP 0034] the coinbase script size now is between 4 and 100 bytes in length.
Note: The maximum block height that can be represented in 3 bytes is (2 ^ (3 x 8 bits)) -1) == 16,777,215. At time of writing the block height is 614,372, therefore > 16 million more blocks can be represented with the current structure.
The upcoming innovation, MinerID will use the Coinbase transaction to present information to the network such as node identity, transaction pricing data and more. This data will use standard formats such that user wallets shall be able to read and parse the information, giving them up-to-date knowledge of which nodes are competitive on the network and more.