BA-08 · LESSON 06

Coinbase and subsidy

KEY DEFINITIONS

Terms used in this lesson

Coinbase transaction: The special first transaction in a Bitcoin block, which claims permitted subsidy and fees and has no ordinary prior-output input.
Block subsidy: New bitcoin that consensus permits a block's coinbase transaction to create at a particular height.
Witness: Signatures, scripts, or other data supplied to satisfy a Bitcoin output’s spending condition.
UTXO: Unspent transaction output: one discrete chunk of bitcoin that can be used as a transaction input.
Outpoint: A transaction ID plus output number that identifies one exact prior output.
SegWit: Segregated Witness: a Bitcoin upgrade that separates authorization data from the transaction identifier and introduces versioned witness programs.
BTC: The common market ticker for bitcoin.

The coinbase creates permitted subsidy and collects fees, with maturity rules before its outputs can be spent.

45 min Difficulty 2/5 Not started

VISUAL MODEL

See the whole mechanism before going step by step

Use the diagrams to orient yourself. Then the guided explanation below teaches every part in depth.

4 explanatory views

CONCEPT-SPECIFIC MAP · block validationA full node accepts a block only after layered checksSelect any state to inspect its exact role.

RELATIONSHIP MAPOrdered validation pipeline

01
HEADERParent, target, and proof of work
The node checks structure, parent relation, target encoding, time rules, and header hash.
02
MERKLERecomputed root matches
Transaction identifiers in order must reconstruct the header commitment.
03
TRANSACTIONSSyntax and no duplicate spends
Every transaction and input is validated against consensus rules.
04
SCRIPTSAll inputs succeed
Script verification uses the rules active at the candidate block height.
05
CHAINSTATEAtomic UTXO update
A failed block never partially mutates accepted chain state.

Rule shown: Receiving a block is a request to verify it, not evidence that it is valid.

STAGE 1 OF 5HEADER: Parent, target, and proof of work

The node checks structure, parent relation, target encoding, time rules, and header hash.

Governing relationship: Receiving a block is a request to verify it, not evidence that it is valid. Complete path: 1. HEADER, Parent, target, and proof of work. The node checks structure, parent relation, target encoding, time rules, and header hash. 2. MERKLE, Recomputed root matches. Transaction identifiers in order must reconstruct the header commitment. 3. TRANSACTIONS, Syntax and no duplicate spends. Every transaction and input is validated against consensus rules. 4. SCRIPTS, All inputs succeed. Script verification uses the rules active at the candidate block height. 5. CHAINSTATE, Atomic UTXO update. A failed block never partially mutates accepted chain state.

1. State transitionWhat exists, what changes, and what results

BEFORE

Permitted subsidy is 3.125 BTC and included transaction fees total 0.075 BTC.

MECHANISM

The coinbase input uses a null previous outpoint and includes block-height commitment and miner-selected extra data under applicable rules.

AFTER

Subsidy is new issuance; fees are reassigned existing bitcoin. The coinbase can underclaim but never exceed their permitted sum.

Text equivalent: Starting from Permitted subsidy is 3.125 BTC and included transaction fees total 0.075 BTC. The mechanism begins when The coinbase input uses a null previous outpoint and includes block-height commitment and miner-selected extra data under applicable rules. The resulting lesson is Subsidy is new issuance; fees are reassigned existing bitcoin. The coinbase can underclaim but never exceed their permitted sum.

2. Mechanism pathSelect a stage to inspect its job

STAGE 1 OF 5

Create the special input

The coinbase input uses a null previous outpoint and includes block-height commitment and miner-selected extra data under applicable rules.

Complete path: 1. Create the special input: The coinbase input uses a null previous outpoint and includes block-height commitment and miner-selected extra data under applicable rules. 2. Choose reward outputs: A pool may split reward among payout scripts, commitments, or other outputs while staying within the permitted total. 3. Sum subsidy and fees: Fees equal inputs minus outputs for non-coinbase transactions. The coinbase may claim no more than their sum plus the height-selected subsidy. 4. Commit witness data: For SegWit blocks, a coinbase output carries the witness commitment, linked to a reserved witness value in the coinbase input witness. 5. Wait for maturity: Outputs created by the coinbase cannot be spent until the consensus maturity depth is reached, limiting complications from reorged mining rewards.

3. Rule and failure boundaryWhat accepts the result and where it can stop

ACCEPTED PATH

Height selects subsidy, ordinary transaction fees add to the ceiling, output totals cannot exceed it, and spending height must satisfy 100-block coinbase maturity.

CHANGED CONDITION

One-satoshi overclaim or height 99 spend rejects; underclaim remains valid but permanently leaves value unissued.

Important distinction: Every satoshi in a coinbase transaction is newly issued. Only the subsidy is new issuance. The fee portion comes from value omitted from ordinary transaction outputs.

Text equivalent: The accepted path is enforced by Height selects subsidy, ordinary transaction fees add to the ceiling, output totals cannot exceed it, and spending height must satisfy 100-block coinbase maturity. If the required condition changes, One-satoshi overclaim or height 99 spend rejects; underclaim remains valid but permanently leaves value unissued.

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Learn the idea

The coinbase transaction is the first transaction in a block. It has a special input that does not spend a prior UTXO and may create up to the permitted block subsidy plus transaction fees. Coinbase outputs require 100 additional blocks before they can be spent, a rule called coinbase maturity.

GUIDED EXPLANATION1/5 ideas inspected

Create the special input

The coinbase input uses a null previous outpoint and includes block-height commitment and miner-selected extra data under applicable rules.

The worked example follows the explanation

Inspect every idea above to open it.

Important distinction“Every satoshi in a coinbase transaction is newly issued.”

Only the subsidy is new issuance. The fee portion comes from value omitted from ordinary transaction outputs.

FINISH LEARNING FIRST

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