A fundamental blockchain data structure representing unspent value that can be used in future transactions.
An Unspent Transaction Output (UTXO) is a fundamental data structure in many blockchain systems, representing a discrete piece of value that has been sent to a specific address but has not yet been spent. UTXOs function like individual digital bills or coins in your wallet that can be spent in future transactions.
"If Alice receives 5 BTC in a transaction, this creates a UTXO worth 5 BTC that is associated with Alice's address. When she later spends 2 BTC, this UTXO is consumed and two new UTXOs are created: one worth 2 BTC going to the recipient and another worth 3 BTC returning to Alice as change."
The UTXO model is distinct from the account-based model used in blockchains like Ethereum. Instead of tracking balances in accounts, UTXO-based systems like Bitcoin and Bitcoin Cash track individual units of value. Every transaction consumes existing UTXOs as inputs and creates new UTXOs as outputs.
"In Bitcoin's UTXO model, if you have received BTC from three different sources, your wallet doesn't show a simple balance of their sum—it actually contains three separate UTXOs that will be used individually in future transactions."
UTXOs have important privacy implications. Since each UTXO must be spent entirely when used in a transaction, wallets typically create change outputs that return unspent value to the sender. This pattern can reveal relationships between addresses and transactions, potentially reducing privacy.
"Privacy-focused wallets may implement coin control features that allow users to manually select which UTXOs to spend in a transaction, helping to maintain better financial privacy."
Efficient UTXO management is important for several reasons:
Transaction Fees: More inputs (UTXOs) in a transaction means larger transaction size and higher fees UTXO Consolidation: Combining many small UTXOs into fewer larger ones can reduce future transaction fees Dust UTXOs: Very small UTXOs that cost more in transaction fees to spend than they're worth UTXO Set Size: The total collection of all UTXOs on a blockchain affects node performance and scalability
"After receiving many small payments, Alice performed a UTXO consolidation transaction during a period of low network fees, combining dozens of small UTXOs into a few larger ones to reduce fees on future transactions."
All terms and definitions may update as the Cryptionary improves.