What Is a UTXO (Unspent Transaction Output)?
A UTXO (Unspent Transaction Output) is a discrete chunk of bitcoin that remains after a transaction and can be spent in future transactions. Think of UTXOs as digital bills or coins in your wallet - each one represents a specific amount of bitcoin that you own and can spend.
Bitcoin's Accounting Model
Unlike traditional bank accounts with balances, Bitcoin tracks individual outputs from previous transactions. Your wallet balance is simply the sum of all UTXOs controlled by your private keys.
How UTXOs Work
Transaction Inputs & Outputs
When you send bitcoin, you consume one or more UTXOs as inputs and create new UTXOs as outputs. If a UTXO is larger than the amount you want to send, the difference is returned to you as "change" in a new UTXO.
Coin Selection
Your wallet automatically selects which UTXOs to spend when creating a transaction through a process called coin selection. This affects transaction size, fees, and privacy.
The UTXO model is fundamental to Bitcoin's design, providing strong security properties and enabling features like transaction privacy techniques. Understanding UTXOs is essential for advanced Bitcoin usage and optimization.
Quick Facts
- •Like digital bills or coins
- •Each UTXO can only be spent once
- •When spent, creates new UTXOs
- •Different from account-based model (like Ethereum)