UTXOs

UTXOs, or Unspent Transaction Outputs, are a fundamental concept in Bitcoin and other UTXO-based blockchains. In this model, transactions do not modify account balances directly. Instead, they consume existing unspent outputs and create new outputs. The collection of all unspent outputs at any moment is called the UTXO set and represents the total amount of spendable funds on the network.

Each UTXO is tied to a locking script that specifies the conditions required to spend it, typically including a cryptographic signature that proves control of the corresponding private key. To spend a UTXO, a transaction provides an unlocking script that satisfies the locking conditions. A new transaction lists inputs that reference prior UTXOs and outputs that define new UTXOs with specified values and scripts.

The value of a transaction input must cover the total value of its outputs, with any difference paid as a transaction fee to miners. An amount that is not spent entirely is usually returned as a change output to the sender, creating a new UTXO controlled by the sender’s keys. A given address can own multiple UTXOs, and the sum of those unspent outputs constitutes its balance.

Nodes maintain the UTXO set to validate transactions and blocks. Full nodes store and update the set, while lightweight clients may rely on other services to verify spendability. The UTXO model contrasts with account-based systems, offering different implications for wallet design, scalability, and privacy, and it is central to how funds are tracked and spent in these networks.