What is a UTXO?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 5 min
In short
A UTXO is an unspent transaction output, and Bitcoin tracks ownership in these units rather than in account balances. Spending does not edit a number; it consumes existing chunks and creates new ones. Your balance is nothing more than the sum of the chunks you can spend.
Key points
- A discrete chunk of coin left unspent by an earlier transaction
- Your balance is the sum of the UTXOs you control
- Spending consumes the whole chunk and creates a change output
- Double spending is blocked because a UTXO can be spent only once
Definition
An output of a past transaction that has not yet been used as the input of another. Sending funds means consuming such outputs as inputs and creating new ones.
Think of banknotes. To pay 3,000 yen with a 10,000-yen note you hand over the whole note and take change; you cannot tear it. A UTXO behaves the same way: to send 0.2 BTC from a 0.5 BTC output, you consume all 0.5, pay 0.2 to the recipient and return just under 0.3 to yourself.
Nodes keep the current set of unspent outputs in memory. Validating a transaction means checking that its inputs are still in that set, so there is no need to replay the whole history. If two transactions claim the same UTXO, only the one that reaches a block first survives.
Because a transaction can list many inputs and outputs, the model parallelises well. The cost is that a wallet holding hundreds of tiny outputs needs a large, and therefore expensive, transaction to combine them. Bitcoin, Litecoin and Cardano all use variants of this design.
Watch out for
- · Fees scale with transaction size, so a pile of tiny outputs makes sending expensive
- · Change usually goes to a fresh address; funds that seem to vanish from view are not lost
- · There is no balance field to edit here, so reasoning about it like an account model leads to mistakes