Ethereum: Why Coinbase Can’t Be Used
At first glance, it might seem surprising that Coinbase’s highly liquid cryptocurrency Ethereum (ETH) can’t be used for transactions. After all, we’ve seen countless online marketplaces and payment systems use Ether to facilitate buying and selling. However, there’s a fundamental reason behind this limitation.
According to Bitcoin Wiki, which provides detailed information about the Bitcoin network, the genesis block, also known as the “first block of the blockchain,” is special. This block contains the first 50 BTC (Bitcoins) that were mined during the creation of the Bitcoin network.
The problem isn’t the value or scarcity of ether itself, but rather how it was distributed when the block was created. As a result of this unique genesis block, the 50 BTC reward for 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 distributed, open-source protocol called Blockchain. The creation of each new block involves solving a complex mathematical puzzle, and a certain number of coins of a “difficulty” must be mined in order for the miner to be awarded a reward.
The problem is that when the 50 BTC reward was originally minted, it didn’t actually belong to anyone. Bitcoin’s creators (Satoshi Nakamoto) simply shared the first 50 BTC among themselves as a gesture of generosity and a way to test the protocol.
As a result, most of the 21 million coins in existence remain unused, including Coinbase’s Ethereum holdings. This is because genesis block rewards are designed to be used only to create new blocks on the Bitcoin network, not to transfer Ether directly from one wallet to another.
This fundamental difference between Bitcoin and Ethereum has a significant impact on 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 the peculiarities of this unique genesis block.
Conclusion
In summary, the reason why Ethereum funds on Coinbase cannot be spent is due to the way the genesis block was distributed when the block was created. The 50 BTC reward for creating each new block is directly tied to the total number of coins in existence and cannot be transferred directly between wallets. This fundamental difference between Bitcoin and Ethereum highlights the uniqueness of each cryptocurrency and how they are designed to function in their respective ecosystems.