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What is a UTXO? Unspent Transaction Output Explained

Publicación:: Jul 11, 2024
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Discover what a UTXO is, how UTXOs work in Bitcoin wallets, and their role in solving the double-spend problem.

What is a UTXO? Unspent Transaction Output Explained

In the world of cryptocurrency, especially within the Bitcoin ecosystem, understanding how transactions work is important. One of the fundamental concepts that power Bitcoin and other similar cryptocurrencies is the UTXO or Unspent Transaction Output. This guide will explore the UTXO (Unspent Transaction Output) model, how it works, and its role in solving the double-spend problem.

Before We Continue

Before we continue exploring UTXOs, remember that Trust Wallet - a secure, self-custody crypto wallet - supports 10M+ assets across 100+ blockchains including Bitcoin. You can buy, sell, swap, transfer, and earn crypto all in one place. Trust Wallet is available for mobile app download on iOS and Android, or you can install the Trust Wallet Extension for your desktop browser.

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What is a UTXO?

UTXO stands for Unspent Transaction Output. UTXO encompasses:

A UTXO is a record of unspent cryptocurrency that remains after a transaction is executed. UTXOs serve as the digital equivalent of change you receive after making a cash purchase. Each UTXO is unique and represents a specific amount of cryptocurrency that can be used as an input for future transactions. UTXOs are the fundamental units that collectively make up your Bitcoin wallet balance, forming the building blocks of the Bitcoin transaction system.

How Do UTXOs Work?

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To understand how UTXOs work, let's consider an analogy with physical cash and then explore how it applies to Bitcoin transactions:

Imagine you have a $100 bill and make a $30 purchase. You don't cut the bill into pieces; instead, you give the whole $100 and receive $70 in change. In this scenario, the $100 bill represents an initial UTXO, the $30 payment creates a new UTXO for the merchant, and the $70 change becomes a new UTXO for you.

Similarly, in the Bitcoin network:

Each Bitcoin transaction consists of inputs and outputs:

This structure enables precise tracking of Bitcoin ownership and spending, ensuring that each UTXO can only be spent once and maintaining the integrity of the Bitcoin ledger.

The Role of UTXOs in Bitcoin Wallets

Understanding UTXOs is important for comprehending how a Bitcoin wallet works. A Bitcoin wallet doesn't store Bitcoins. Instead, your Bitcoin wallet manages UTXOs associated with your addresses. Here's how UTXOs interact with your wallet:

How UTXO Helps to Solve the Double-Spend Problem

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The double-spend problem refers to the risk of using the same digital currency multiple times owing to the ease of duplicating digital information. Solving this issue is important for cryptocurrency viability. Bitcoin's UTXO model addresses this challenge by treating each unit of currency as a unique, traceable entity, ensuring it can't be spent more than once without detection.

Here's how UTXO helps prevent double-spending:

Advantages and Challenges of the UTXO Model

Advantages:

Challenges:

How to Buy Bitcoin Using Trust Wallet

You can buy crypto, including Bitcoin, using Trust Wallet, via our trusted partners. Here’s how:

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How to Deposit Bitcoin to Your Trust Wallet Address

In addition to buying BTC using Trust Wallet, you can also deposit BTC from another Bitcoin wallet or a centralized exchange. Here’s how:

From here you have two options. You can either:

  1. Copy your deposit address and use that on your exchange account or other wallet to send funds to.

  2. Use the “Deposit from Exchange” option to deposit crypto from your exchange account.

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Closing Thoughts

The UTXO model provides simplicity, security, and scalability, making it a cornerstone of blockchain technology. Whether you are a beginner or an advanced user, understanding UTXOs will deepen your appreciation of how cryptocurrencies function and the innovative solutions they offer to longstanding problems in digital transactions.

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Disclaimer: Content is for informational purposes and not investment advice. Web3 and crypto come with risk. Please do your own research with respect to interacting with any Web3 applications or crypto assets. View our terms of service.

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Note: Any cited numbers, figures, or illustrations are reported at the time of writing, and are subject to change.