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UTXO (Unspent Transaction Output)

UTXOs are the fundamental building blocks of bitcoin transactions and consist of the idea of bitcoin “balances”.

UTXOs are chunks of bitcoin, which can be as small as a single satoshi, that are recognized as currency units by the entire network. When a user receives bitcoin as payment, that amount is actually recorded by the blockchain as a UTXO. In fact, a user’s bitcoin balance is really just an aggregation of UTXOs that are scattered throughout the blockchain in hundreds of transactions and blocks. The idea of a bitcoin “balance” is a UI/UX improvement from bitcoin wallet applications. They aggregate all the UTXOs associated with a certain address and aggregate it into a number that is seen by a user in the UI of a bitcoin wallet.

UTXOs can be considered to be the individual denominations of bitcoin and they can be of any arbitrary size.

UTXOs create input and output charges to each transaction within the Bitcoin network. The explicit purpose of well designed Bitcoin wallets is to obfuscate the complexities of dealing with UTXOs behind UI/UX.

Links

  • Antonopoulos, Andreas M. Mastering Bitcoin: Unlocking Digital Crypto-Currencies. 2015. pg 114-115.
  • UTXO Investopedia