Coin Distribution

This adds an incentive for nodes to support the network and provides a way to initially distribute coins into circulation, since there is no central authority to issue.

- Satoshi Nakamoto, Bitcoin Whitepaper

The distribution of new coins to the operators of block winning nodes acts as a subsidy to bootstrap the build-out of network infrastructure, giving the network time to accumulate users and providing a simple way to distribute the coinage used on the network to the miners who are providing the service of building blocks for network users.

Because there is no central authority, the distribution is moderated through *Nakamoto Consensus, with nodes validating other nodes’ self awarding of coins in the coinbase transactions they construct as part of their blocks. Because of this, nodes are incentivised to behave honestly and to perform a highly accurate accounting of their subsidy payment and the fees contained in the block.

All satoshi tokens used in transactions on the Bitcoin network are distributed through this subsidy, and all coins in circulation can be traced via the transaction DAG back to a coinbase transaction.

*Nakamoto Consensus refers to the set of rules, in combination with the Proof of Work consensus model in the network, that govern the consensus mechanism and certifies its trustless nature. Nakamoto Consensus can be broken down into 4 main parts.

• Proof of Work (PoW)

• Block Selection

• Scarcity

• Incentive Structure

The combination of components allows Bitcoin to become the distributed network for value transfer that it is. It operates with trustless consensus and will remain secure as long as the majority of power contributed to the mining process is in the hands of honest miners.