Ethereum: Why Can’t Coinbase Be Spent?
At first glance, it may seem surprising that Coinbase’s highly liquid cryptocurrency, Ethereum (ETH), cannot be spent on transactions. After all, we’ve seen countless online marketplaces and payment systems use Ether to facilitate purchases and sales. However, there’s a fundamental reason behind this limitation.
According to the Bitcoin Wiki, which provides detailed information about the Bitcoin network, the genesis block, also known as the “first block in the blockchain,” is special. This block contains the first 50 BTC ( Bitcoins) that were mined during the creation of the Bitcoin network.
The problem lies not with the value or scarcity of Ether itself but rather with how it was distributed at block creation. As a result of this unique genesis block, the 50 BTC reward for creating each new block is tied to the total number of coins in existence – namely, 21 million – rather than being directly transferable.
To see why, consider that the Bitcoin network is based on a decentralized, open-source protocol called the Blockchain. The creation of each new block involves solving a complex mathematical puzzle, and at block creation, a certain number of “difficulty-adjusted” coins are required to be mined in order for the reward to be granted to the miner.
The issue here is that when the 50 BTC reward was initially minted, it didn’t actually belong to anyone. The creators of Bitcoin (Satoshi Nakamoto) simply distributed the first 50 BTC among themselves as a gesture of generosity and a way to test the protocol.
As a result, the majority of the 21 million coins in existence remain unspent, including Coinbase’s Ethereum holdings. This is because the genesis block rewards were designed to be used only for creating new blocks on the Bitcoin network, not for transferring Ether directly from one wallet to another.
This fundamental distinction between Bitcoin and Ethereum has significant implications for how we interact with these two popular cryptocurrencies. While Ethereum can still be traded on marketplaces like Coinbase, its native cryptocurrency cannot be spent or transferred using traditional payment systems due to this unique genesis block quirk.
Conclusion
In conclusion, the reason why Coinbase’s Ethereum holdings cannot be spent is rooted in the way the genesis block was distributed at block creation. The 50 BTC reward for creating each new block is tied directly to the total number of coins in existence and not directly transferable among wallets. This fundamental distinction between Bitcoin and Ethereum highlights the unique nature of each cryptocurrency and how they are designed to operate within their respective ecosystems.