An Unspent Transaction Output (UTXO) is the remaining portion of cryptocurrency that has not been spent after a transaction is completed.

Understanding Unspent Transaction Output (UTXO)

Imagine completing a crypto transaction and having some digital currency left over — that’s your Unspent Transaction Output (UTXO). It’s the crypto equivalent of getting change back from a cash purchase. Each time you transact, the blockchain updates to reflect these changes.

How UTXO Works

UTXO’s Role in Transactions

When you send crypto, you use UTXOs as inputs. For example, sending 2 BTC from a 5 BTC UTXO means the remaining 3 BTC becomes a new UTXO, minus transaction fees.

Why UTXO Matters

UTXOs are crucial for maintaining the integrity of the blockchain. They ensure that only the rightful owner can spend the crypto, safeguarding against fraud.

UTXO vs. Account Balance Model

Bitcoin’s UTXO model differs from Ethereum’s Account Balance Model. Bitcoin tracks individual transaction outputs, while Ethereum monitors account balances. The UTXO model is often seen as more secure and efficient in terms of storage.