UTXO

Written by Regan Grishaber

Introduction

UTXO stands for unspent transaction output, the building block of all bitcoin transactions that records what outputs are available to be spent and helps the network avoid double spending.

Every bitcoin transaction consists of taking the output from a previous transaction and using it as input for the next transaction. When a transaction is recorded on the blockchain, its output is considered unspent until it has been used as input for a subsequent transaction. When fully validating nodes try to determine if a transaction is valid, they test whether the input of the transaction is part of the UTXO database. If an input cannot be found in the UTXO database, the transaction is considered invalid, as it either represents an attempt to double spend or spend currency that does not exist. When a new transaction is recorded on the blockchain, a new UTXO is formed and the UTXO that was used as input can no longer be spent.

A UTXO is unrelated to account-based transaction models, as it simply represents a piece of currency that can be unlocked only by someone with knowledge of the private key. An individual user’s bitcoin balance can theoretically be scattered across UTXOs from thousands of different transactions and blocks. Wallets and other third-party applications that show an account balance for UTXO-based cryptocurrencies are really aggregating the balance of all UTXOs associated with a particular address. In addition to Bitcoin, a host of other cryptocurrencies implement UTXOs, including Bitcoin Cash, Litecoin, and ZCash. Prominent examples of the contrasting account-based transaction model include Ethereum and EOS.

Suggested Reading

UTXO vs Account/Balance Model by Flora Sun

What Is a UTXO? | A Beginner’s Explainer on Transaction Outputs by Steve Buchko

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