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UTXO

UTXO: Unspent Transaction Output

UTXO, or Unspent Transaction Output, is a mechanism used in Bitcoin and other Bitcoin-based cryptocurrency systems for managing account balances. It records the state of each transaction output to track the ownership of every bitcoin.

In the UTXO model, Bitcoin transactions are conducted by consuming (spending) previous UTXOs and creating new UTXOs. Each UTXO represents an unspent amount of bitcoin until it is consumed by a new transaction.

When calculating the balance of an address, all UTXOs are aggregated. A UTXO is always consumed as a whole (indivisibility), and the remaining amount from a transaction requires "change."

A Bitcoin transaction consists of Inputs and Outputs:

  1. Inputs: Reference previous transaction UTXOs. Each input references a specific UTXO and provides proof for spending that UTXO (typically a digital signature to unlock it).
  2. Outputs: Create new UTXOs, specifying the recipient's address and amount. Each output designates the bitcoin recipient and amount, generating a new UTXO.

A UTXO must be any integer multiple of 1 "satoshi" (1 BTC = 100,000,000 satoshis).