Unspent Transaction Output
Unspent Transaction Outputs (UTXOs) are the outputs of previous transactions that can be used as inputs for new transactions. They represent the current balance of a Bitcoin address. Each UTXO is a discrete chunk of Bitcoin, much like a bill or coin in physical currency.
"If Alice sends 1 BTC to Bob, and Bob wants to send 0.5 BTC to Charlie, Bob would use the 1 BTC UTXO as an input for the transaction. The transaction would then create two new UTXOs: one for the 0.5 BTC going to Charlie, and one for the 0.5 BTC change going back to Bob."
UTXOs are fundamental to how Bitcoin transactions work. They prevent double-spending and provide a clear, auditable trail of transactions on the blockchain.
"Each UTXO can only be spent once, and once it's spent, it's replaced by a new UTXO. This ensures that the same Bitcoin can't be spent twice."
Managing UTXOs efficiently is important for optimizing transaction fees. Transactions with many inputs (i.e., using many UTXOs) can be larger in size and thus more expensive.
"If Bob has 10 UTXOs of 0.1 BTC each and wants to send 1 BTC to Charlie, he could do so in a single transaction using all 10 UTXOs. However, this would be a larger transaction than if he had a single 1 BTC UTXO to spend."
* All terms and definitions may update as the Cryptionary improves.