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WHAT: An “Unspent Transaction Output” (UTXO) is basically just change waiting to be spent.

WHY: Each Bitcoin transaction has at least one input and one output. Each output waits as a UTXO until a later input spends it. UTXOs are outputs of a transaction which aren’t yet inputs of another transaction (you can see them in the charts section at blockchain.info).

EXAMPLE: When you receive Bitcoin in your wallet you really just have one or more UTXOs for that amount. Spending in Bitcoin does not take place using a single data byte. Instead, multiple fractions of Bitcoin are retrieved by the algorithm to fulfill a spending request.

In the example above, a 1.5 BTC purchase gets 1 BTC from one byte and 0.75 BTC from another. Change of .25 BTC from each is sent to a UTXO database, and a record of the spent coin will be on the blockchain/ledger.

 

REFERENCES:
https://www.investopedia.com/terms/u/utxo.asp
https://bitcoin.org/en/blockchain-guide#introduction
https://en.wikipedia.org/wiki/Unspent_transaction_output

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