# Block-Level Validation Rules

When validating a transaction, it must be done within the context of a block. That may be a historical (or new) block that the transaction is a part of or it may be as a part of a hypothetical "next" block. The latter category, often referred to as "mempool" transactions, represent transactions that a node is aware of, and considers valid, but that have not yet been added to a block. In this case, they are treated as though they are all in a new block that follows after the last block in the longest chain the node is currently aware of.

The reason that transaction validation is context-dependent in this way stems from what is probably the most important validation rule: the inputs to a transaction must be a UTXO. That is, transactions must spend transaction outputs that were created by a prior transaction but that have not been spent by another transaction in the target block or its history. Note that this means that blocks with divergent histories will treat different transactions as valid. For example, consider the following scenario:

graph LR; ... --> blockn(Block N) blockn --> blocka(Block A) blockn --> blockb(Block B) blocka --> blocka2(Block A') blockb --> blockb2(Block B')

Since Block A' and Block B' are at the same block height, there may be some nodes that treat Block A' as the most recent block (e.g. Node A) and others that treat Block B' as the most recent block (e.g. Node B). If a transaction is submitted to both Node A and Node B that spends an output created in a transaction in Block A, Node A may consider the transaction valid while Node B would reject it on the grounds that it is dependent on a UTXO that is not a part of Block B''s history, which only contains Block B', Block B, and Block N (and its parents).

Other block-level validation rules include:

• Coinbase Transaction Reward Validation
• The coinbase transaction in a block must collect the correct reward for the block height. For more information see Coinbase Transaction.
• Transaction Chaining Limit
• Many nodes impose a limit of transactions that can be chained together in a single block. That is, if transaction Z spends an output of transaction Y, which spends an input of transaction X, and so on to Transaction A, the transaction may be rejected.
• This limit is often set to 25 chained transactions.
• Coinbase Transaction Block Height
• The coinbase transaction in a block must provide an unlocking script that that starts with a push operation which pushes the block height of the block it is contained in.
• This requirement was added in BIP-34 to ensure that coinbase transactions are unique.