Bitcoin UTXO Model Explained
Bitcoin represents spendable value as unspent transaction outputs, or UTXOs. A transaction consumes existing outputs and creates new outputs rather than editing a single account balance in place.
How it works
Each input identifies an earlier output and satisfies its spending conditions. The sum of new outputs cannot exceed the input value; the difference is the transaction fee. An output is spent as a whole, so wallets commonly create a change output. The ledger’s UTXO set prevents an already spent output from being spent again in accepted history.
Worked example
A wallet selects outputs of 0.30 and 0.25 BTC to pay 0.40 BTC. With a 0.001 BTC fee, change is 0.30+0.25−0.40−0.001=0.149 BTC. Two new outputs may pay the recipient and change. The 0.149 is not free extra money: it returns the unused input value under the chosen fee.
Amounts, prices and scenarios are fictional teaching examples. They exclude any effects not explicitly stated and are not trade recommendations.
Limits and common mistakes
Multiple inputs increase transaction size and can reveal address relationships. Dust, fee rates and wallet selection policies affect spendability and privacy. A balance display alone may hide how many inputs are needed for a future payment.
Knowledge check
Can one input be partially left unspent after a transaction uses it?
Read the explanation
No. The referenced output is consumed. Any retained value must be represented by a new output under the transaction’s conditions.
References and further reading
- Bitcoin Developer Guide: transactions, blocks and consensus
- Bitcoin protocol improvement specifications
These sources explain the underlying concepts and specifications. They do not endorse QBMFX Academy. Check the relevant market, protocol version and reporting rules before applying an example.