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In this transaction, I transferred 2 BTC from my Coinbase.com wallet to an external address.

Transaction Outputs

Why are there 3 outputs in the transaction?

I understand the output of 2 BTC, and the 0.0001 BTC transaction fee. One of the outputs is likely a change address. But I don't know what the 3rd output is for.

Is/does Coinbase.com

  • combine unrelated user transactions into a single blockchain transaction?
  • tracking user's funds or transactions off the blockchain (effectively commingling funds)?
  • extracting its own fee from the transaction?
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Yes, simply put, Coinbase and some other wallet/merchant services have internal bookkeeping.

So you've deposited 2 BTC. Soon thereafter coinbase will move funds around:

  • to cover other deposits/withdrawals
  • to exchange
  • to put in a hot/cold wallet

Once you've deposited your Bitcoin, just like a bank, you're effectively given an IOU (unless for services like Blockchain.info you own the private keys) and your withdrawal will draw upon either a single or multiple inputs to reimburse you.

The main reason this is done is twofold:

  • to cut down on Txn fees
  • because the bitcoin protocol always sends the full input amount (the remainder is sent as change)

By coupling change outputs as credits this allows for internal bookkeeping.

(It's worth noting that the txn fee wasn't paid by you directly. It's just a standard multi input txn)

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