Homework on Bitcoin Transactions and UTXO - Questions

Blockchain and Bitcoin 101
#1992
  1. UTXO are the inputs your have received but not spent yet.
  2. Invalid transaction.
  3. TransactionFee=Inputs-Outputs.
  4. Always generate new addresses so that it is hard to tell which output goes back to the sender.
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#1993

Bitcoin don’t exist accept in the from of UTXOs which are transacted funds from payer to payee. UTXOs goes from wallet to wallet representing BTC amount.

All available UTXOs are added together to processes a transaction, so if one UTXO is not big enough to over one transaction then partial or full funds will be pulled out of another UTXO which is available in the same wallet.

Wallet don’t always shows the transaction fee amount, however amount difference between transaction input and output will be the transaction fee amount.

By sending BTC though multiple address owned by the same owner will increase privacy factor.

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#1994

  1. UTXO is the confirmation of blockchain for your available founds

  2. You can use different UTXO (imput) to complete the transaction OR TO SPEND incoming message of blockchain for availability

  3. Input = output + transaction fee

  4. Using different inputs and outputs

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#1995
  1. UTXO’s are data created from a previous transaction. All the UTXO’s connected to a single wallet represent its balance available to send.
  2. Transactions without sufficient UTXO’s will not be confirmed.
  3. Total of inputs minus total of the outputs is how a wallet implies the transaction fee.
  4. Increasing the number of outputs increases privacy.
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#1996

  1. Describe what Unspent Transaction Outputs (UTXO) are.
    TXs consists of input and output, lets see you have received 1 BTC (input) and of that you have spend 0.5 BTC (output) then you have 0.5 BTC unspend transaction output (amount which your private key is entitled to send in the future). To put it another way, your inputs have been someones UTXO and consequently its output before.

  2. What would happen if you don’t have any single UTXO that is large enough to cover for your
    transaction?
    Your wallets queries the blockchain and sums up all UTXOs belonging to your private key. If the sum of all UTXOs is not sufficient the transaction will not be constructed.

  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    by subtracting input from output.

  4. How could you use the notion of transaction inputs and outputs to increase privacy in your
    transaction?
    All inputs and outputs of transaction are stored on the blockchain by the use of the corresponding wallet address. Since it is not possible to know to whom an address belongs, you can not figure out are the two parties of the transaction. The two parties can even be the same individual.

#1997

You can just use multiple addresses in a wallet :slight_smile:

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#1998

What if you withdraw to an address from an exchange where you did KYC? :slight_smile:

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#1999

yeah, good point…looking at answers from others, I think I didnt really got the question. The correct answer would be that one should always create a new address for each withdrawal, right? …somehow I am still struggeling in understanding how this should increase the privacy.
Can you make an example please?

#2000
  1. it is incoming funds that not yet used in transaction by the wallet.
  2. the wallet will combine few UTXO together to meet requirement of that transaction and also will send back any left over funds as a new UTXO.
  3. it will subtract all outputs from all inputs.
  4. every transaction creates a unique input/output codes which impossible to determine from outside what is the actual amount and where it goes.
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#2001

  1. Describe what Unspent Transaction Outputs (UTXO) are.
    Received transactions amount that you can spend

  2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
    Transaction will be rejected

  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    Fee = Input - Output

  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    Using different addresses for each received transaction

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#2002

So when you for example withdraw funds from an exchange, that exchange knows that this is your address. Since you filled the KYC they also know who you are in the real world. This is how they know your balance on that address.

If for example now you want to send the funds on that address to a friend or a merchant he will give you his address where he wants to receive the funds. He will generate a new address and since you won’t send him the entire balance you can send the remainder to a new address you own.

After that there is no way to be for certain which of these outputs you created (the one you send to a friend and the one you sent back to yourself) is yours and which one is from the other party you interacted. :slight_smile:

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#2003

This is not in fact true (at least not in Bitcoin). The Bitcoin blockchain is a public ledger which means everyone know exactly where and how much someone sent. If for example you withdraw funds from an exchange that you had KYC, they know that the address belongs to you personally.

To avoid that is by using a new address every time you make a transaction from the address you used when withdrawing funds from the exchange, clearing your path since after that there is no way of knowing which address is yours if they can’t link it to you personally.

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#2004

  1. This is an output, what’s left over from the/a previous transaction, that are used as inputs (what’s left over) which is taken from the previous outputs added together (UTXO/balance). It is basically taking money from a balance and having the excess from previous transactions.

  2. If you don’t have a single UTXO that is large enough to cover a transaction the transaction will not operate or go through.

  3. A bitcoin wallet specifies the transaction fee when creating a transaction by calculating the Input - the Output.

  4. It increases privacy in a transaction by creating many addresses to use in inputs and outputs.

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#2005

1.its your stored value that is unspent.
2. It will combine it with your second UTXO and return to you a refund of the difference.
3. Your wallet would get you a fee for the fastest transaction and compute that fee.
4.Privacy is already constructed in the transaction, but i suppose you use multiple addresses to send transactions.

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#2006
  1. UTXOs are the unspent value assigned to the wallet that go back to the wallet
  2. It would not accept the tx
  3. It checks the network to determine what fee is required to process the tx in a reasonable time frame.
  4. increases the signal to noise ratio, making it more difficult to discern which is going where.
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#2007

1 Describe what Unspent Transaction Outputs (UTXO) are.

An Unspent Transaction Output (UTXO) is a transaction or input you receive which you do not spend. Basically, it is the balance in your wallet. Once you create a transaction, it is now a spent transaction output and no longer an UTXO.

2 What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?

If you do not have any single UTXO that is large enough to cover for your transaction, your wallet will not construct your transaction because there is nothing in your balance. It will be discarded. Therefore, your wallet will not sign any transaction nor broadcast anything across the network.

3 How would a bitcoin wallet specify the transaction fee when creating a transaction?

A bitcoin wallet would specify the transaction fee when creating a transaction by using a formula where inputs equal outputs plus a transaction fee.

4 How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?

I would use the notion of transaction inputs and outputs to increase privacy in my transaction by being both the sender and recipient of transactions between different addresses in my wallet/s where I control the keys to both.

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#2008

now I got it, thanks a lot man, very appreciated your support

#2009

Homework on Bitcoin Transactions and UTXO - Questions

  1. Describe what Unspent Transaction Outputs (UTXO) are.

Answer: Unspent Transaction Outputs from another wallet and Inputs to your or another wallet

  1. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?

Answer: The transaction action will not be confirmed by the Blockchain.

  1. How would a bitcoin wallet specify the transaction fee when creating a transaction?

Answer: The remainder of seperate outputs where the fee is equal to one output (the smaller subtracted from the larger)

  1. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?

Answer: Because the hash codes or addresses are not connected to a name and a different address is used for each input

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#2010

  1. UTXOs are the amount you can spend

  2. You would combine your UTXOs to create a new transaction to then split and send the necessary amount(s)

  3. Inputs - Outputs = Fee

  4. You can send coins to yourself to other wallets you control with maintaining anonymity

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#2011

  1. UTXO are in fact the available funds that a certain private key has access to. They are created after a transaction procedure. And, at the end of the day they represent one’s wallet balance.

  2. In that case the transaction would be rejected by the nodes of the network. However, it is possible to use more than one UTXO in a single transaction.

  3. So, the transaction fee are calculated from a specific formula. The formula states that transaction inputs = transactions outputs + transaction fee.

  4. By using several inputs and outputs addresses.

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