Coinbase Transaction Secret: Understanding Op 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 “OP_RETURN”, which has caused confusion among many cryptocurrency enthusiasts.
In this article, we will delve into the world of op return and explain why a miner would choose to include OP_RETURN in a Coinbase transaction.
What is Op Return?
The term “op return” comes 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 results can be used to send funds to different recipients without incurring unnecessary gas fees.
Why does a miner need to include OP_RETURN in a Coinbase transaction?
Miners on the Ethereum network use complex algorithms to validate transactions and ensure the integrity of the blockchain. When a user initiates a transaction, miners must 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, OP_RETURN is used to create multiple outputs that can be used to send funds in different ways. Here’s how it works:
- Coinbase receives the initial payment: The user initiates a Coinbase transaction with their wallet.
- Miner creates OP_RETURN output addresses: The Ethereum miner creates two separate output addresses using the operation return algorithm (more on this below).
- Miner adds OP_RETURN to transaction
: 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 other nodes to verify.
Why use OP_RETURN?
There are several reasons why a miner would choose to include OP_RETURN in their transaction:
- Gas fee reduction: Using OP_RETURN, miners can create multiple outputs with different balances, which helps reduce the total gas fee required for a transaction.
- Network efficiency improvement: OP_RETURN allows users to receive coins from multiple sources without having to verify each individual output address.
- Operation Profit Maximization: Miners who use operation returns may have an advantage over those who don’t, by making more transactions and increasing their chances of receiving a larger payout.
Coinbase Transaction Example
Let’s take a closer look at the example you provided: “I’m looking at this Coinbase transaction. I’m confused as to why there are two outputs and why one of them is labeled OP_RETURN.”
In this case, the Coinbase transaction may have been initiated by a user who wants to receive funds from multiple sources (such as a friend’s wallet) without having to check each individual output address.
The “OP_RETURN” designation indicates that the sender has created two separate output addresses using the operation return algorithm. These outputs can be used to send coins to different recipients, which could have been done by simply sending one or more transactions rather than creating additional output addresses.
Conclusion
Finally, transaction fees play a crucial role in the Ethereum transaction process when it comes to Coinbase transactions. Using transaction fees, miners can create multiple output addresses with different balances, reducing gas fees and increasing network efficiency.