The Mystery of the Coinbase Transaction: Understanding Return
When a user interacts with their cryptocurrency wallet on a platform like Coinbase, they can initiate transactions to send funds to other users or receive coins from others. However, when it comes to receiving a large amount of coins, some users might be surprised to see two output addresses in their transaction details. One of these outputs is labeled as “OP_RETURN,” which has sparked confusion among many cryptocurrency enthusiasts.
In this article, we’ll delve into the world of op returns and explain why a miner would choose to include an OP_RETURN in a Coinbase transaction.
What is an Op Return?
The term “op return” originates from the open-source blockchain software Ethereum. An op return is essentially a special type of transaction that allows for the creation of multiple output addresses with different balances, known as “outputs.” These outputs can be used to send funds to various recipients without incurring unnecessary gas fees.
Why would a miner put an OP_RETURN in a Coinbase transaction?
Miners on Ethereum’s network use complex algorithms to validate transactions and ensure the integrity of the blockchain. When a user initiates a transaction, miners need to create multiple output addresses with different balances. These output addresses are then broadcast to the network for verification.
In the case of a Coinbase transaction, an OP_RETURN is used to create multiple outputs that can be used to send funds in various ways. Here’s how it works:
- Coinbase receives the initial payment: The user initiates a Coinbase transaction with their wallet.
- Miner creates output addresses for OP_RETURN: A miner on Ethereum creates two separate output addresses using an op return algorithm (more on this below).
- Miner includes OP_RETURN in the transaction: The miner adds these two output addresses to the Coinbase transaction, creating multiple outputs that can be used to send funds.
- Transaction is broadcast and verified by miners: The transaction is broadcast to the network for verification by other nodes.
Why use an OP_RETURN?
There are several reasons why a miner would choose to include an OP_RETURN in their transaction:
- Reducing gas fees: By using an op return, miners can create multiple outputs with different balances, which helps reduce the overall gas fee required for the transaction.
- Increasing network efficiency
: An op return allows users to receive coins from multiple sources without having to verify each individual output address.
- Miner profit maximization: Miners who use up returns may have an advantage over those who don’t by taking on more transactions and increasing their chances of receiving a larger payment.
The Coinbase Transaction Example
Let’s take a closer look at the example you provided: “I’m looking at this coinbase transaction. I’m confused why there are two outputs and why one of them is labeled with OP_RETURN.”
In this case, the Coinbase transaction might have been initiated by a user who wants to receive funds from multiple sources (e.g., a friend’s wallet) without having to verify each individual output address.
The “OP_RETURN” label would indicate that the transmitter has created two separate output addresses using an op return algorithm. These outputs can be used to send coins to different recipients, which could have been done by simply sending one or multiple transactions instead of creating additional output addresses.
Conclusion
In conclusion, op returns play a crucial role in Ethereum’s transaction process when it comes to Coinbase transactions. By using an op return, miners can create multiple output addresses with different balances, reducing gas fees and increasing network efficiency.
