Homework on Bitcoin Transactions and UTXO - Questions

Blockchain and Bitcoin 101
#2597

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

 Unspent transactions in a wallet are the amount of bitcoin that can be sent from a bitcoin 
 wallet.

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

 If there wasn't enough unspent transactions in a wallet to cover the miner fee then the 
 transaction wouldn't be processed.

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

The wallet would work out the average fee from some previous transaction on the 
blockchain and estimate what the fee might be for the proposed transaction.

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

 A single wallet can contain numerous bitcoin address so it would be difficult to tell if a 
 output was sent to another wallet controlled by a different person or was sent to the same 
 wallet that made the outputting transaction.
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#2598

  1. Unspent Transaction Outputs(UTXO) is a consolidation of outputs that have come into your account(wallet).

  2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction is that it would combine different UTXOs to make the outgoing amount.

  3. A bitcoin wallet would specify the transaction fee when creating a transaction by looking at past transactions on the chain and then look at the fees, then base it off of that(so that your transaction goes reasonably fast).

  4. You could use the notion of transaction inputs and outputs to increase privacy in your transaction by using a different address for each receiving participant.

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#2599

  1. UTXOs are unspent transaction outputs that you are able to use to transfer Bitcoin to others users. It’s basically your Bitcoin balance.

  2. You would have to combine multiple UTXOs until you have enough to cover the amount you’re trying to send plus any transaction fees.

  3. It proposes a transaction fee based on similar previous transactions with the goal of getting your transaction onto the blockchain in a timely manner.

  4. You could use multiple Bitcoin wallets to handle all of your transactions.

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#2600

Hi! This assignment was listed as not having been inc
completed. Please advise.

#2601
  1. Describe what Unspent Transaction Outputs (UTXO) are.
  • They are a collection of previously received unspent value transactions.
  • The sum of all UTXOs adds up to the total wallet balance.
  1. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
  • The transaction would be rejected
  1. How would a bitcoin wallet specify the transaction fee when creating a transaction?
  • The wallet calculates the difference between the Input and output.
  1. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
  • No identity is attached to UTXOs so you could do a transaction from yourself to one or more new addresses belonging to you.
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#2602

Set as completed for me just now.

#2603

Course: Blockchain & Bitcoin 101
Section: Bitcoin Basics

07 Transactions and UTXOs
08 Transactions, UTXOs & Fees
09 Homework - UTXOs

Notes:

This section explains how a wallet constructs a transaction.
It uses UTXOs.

UTXO stands for Unspent Transaction Output

A transaction has inputs and outputs.

Input: At least one, can be more than one. It is where you got the money from.

Output: At least one, can be multiple outputs.
Outputs are people you send money to, and can include yourself.

An output is a UTXO until it becomes an input in another transaction. The person in your output now has UTXO. That person can use it as input to another transaction.

Your wallet will Store your private key information.
When you want to send money it will:
Query the blockchain, asking which UTXOs you have,
Sum your UTXOs (money you can spend),
Show the balance,
Calculate the transaction fee,
Construct the transaction, and
Broadcast your transaction.

A wallet does not store a balance figure like a regular bank account. It calculates a balance when you want to send money.

The Important Rule is you have to spend all of your UTXOs in a transaction.

Can combine UTXOs to have enough for an output transaction.
Can send extra back to yourself.

Inputs = Outputs + Transaction Fee

The transaction fee is calculated by the wallet.
.

Homework

1. Describe what Unspent Transaction Outputs (UTXO) are.
a) A UTXO is money previously received and not yet spent.
b) The sum of a private key’s UTXOs are its balance.
c) UTXOs are inputs to a transaction.
d) The sum of the UTXOs must equal the Outputs plus a Transaction Fee.

2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
Your wallet will combine all your UTXOs. This sum is your total input.
IF this total is less than the amount you need
THEN there is a problem – insufficient funds – your transaction will not be valid
ELSE no worries, your transaction is valid.

Example using paper money: You want to purchase something for $7. You have two $5 bills. The sum avilable is thus $10 and enough to cover a $7 purchase.

3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
Your wallet will look at recent transaction fees and propose an ideal transaction fee value. You will then know how much of your UTXOs to send back to yourself (or another of your private key addresses). You will construct the transaction as money to send to others and money to send back to yourself (if any). Your wallet will calculate the transaction fee using this formula:
Total inputs minus total outputs equals transaction fee.
.
4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
You can create more private keys, each with its own address. You can send money to those addresses. It is like having multiple bank accounts.

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#2604

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

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#2605
  1. Describe what Unspent Transaction Outputs (UTXO) are.
  • They’re funds sent to your address that you have not yet spent, they’re also the funds you send to another address that have not yet been spent.
  1. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
  • That is not important, what is important is that the sum of your UTXOs + the transaction fee is equal to or greater than the transaction, if greater the “change” is sent back to you.
  1. How would a bitcoin wallet specify the transaction fee when creating a transaction?
  • it is input - output also will look at recent transaction fees to choose a like fee to have your transaction go through.
  1. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction? send to yourself on another address. there is no way of knowing which address belongs to which owner.
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#2606

Homework - UTXOs

UTXOs are the initial result of any transaction. The OTXOs associated with your wallet are your “available funds” to spend. Until those outputs (coins) are used in another transaction the are “unspent”, UTXO.

You would have to combine UTXOs as inputs to the transaction, enough to cover the entire transaction (plus fees). Transactions can have multiple inputs and outputs.

The transaction fee is simply the difference between inputs and outputs. Any inputs not used in an output make up the fee.

You can use different addresses to receive coins, sharing different addresses with different people. You can also send to multiple addresses so you could easily send coins back to yourself at a different address. Addresses cannot be tied back to a specific wallet and this provides some privacy, where observers can only see the transactions of the addresses they know about.

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#2607
  1. The UTXO is eventually a difference between an input and an output of the transaction.
  2. You might use different UTXO-s for initiating the transaction. If you do not possess the grand total UTXO balance required to cover the transaction, you cannot make a transaction. Thus, the blockchain prevents anybody from the overspending.
  3. The value of a transaction fee is the difference between the input and the residual UTXO amount.
  4. Using different private wallets in one transaction.
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#2608
  1. Outputs from previous transactions that have not been used as input in another transaction yet.
  2. You have to combine more UTXOs.
  3. As a difference between inputs and outputs sum.
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#2609

1 - UTXO are the transactions received and that you have available to use. Your wallet counts those UTXOs on the blockchain and gives you the total balance available to spend.

2- What is done is to use several or all of the available UTXOs, where the first output of our transaction is directed to the address of the person to whom we make the payment transaction. In this way, our output becomes that person’s input. While the second is a transaction directed to an exchange address. This transaction returns us “the change” or remainder that we have for the operation carried out. That is, an output that becomes an input for ourselves, returning the change of the transaction we make.

3- A transaction has a balance of commissions from the outset. And the structure of the transaction makes that balance available to miners. This is something that we see in all transactions within Bitcoin and it has two purposes:

  • Encourage the work of miners
  • Prevent the network from being vulnerable to attacks

4- You increase the number of outputs, as the transactions are anonymous, you cannot know which wallet belongs to a specific person, so you can put several addresses that belong to the same person to increase security.

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#2610

UTXOs are unspent outputs of a transaction.

An easier way would be to use a new address each time you receive funds inside the same wallet. :slight_smile:

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#2611

You forgot to answer the final question. :wink:

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#2612

Unspent Transaction Outputs (UTXO) are the way balances are saved on the blockchain, it reflects the balance for a specific private key.

The transaction won’t be executed.

The wallet would check the blockchain and search the fees that are being paid, and select a fee that will make the transaction done fast enough.

Increasing the number of inputs and output, so the observer won’t know which one to track.

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#2613
  1. UTXOs are transactions that have been sent to a wallet and in which that receiving wallet has yet to have sent.
  2. The blockchain would reject your transaction
  3. The wallet would read the blockchain to find what is the average going miner fee at the time being, and then provide the private key holder a miner fee that would ensure their transaction will be mined and confirmed on the network.
  4. Use different private keys (resulting in new public keys) to not reuse destinations, use more than one wallet, and use more outputs when sending transactions to anonymize one’s wallet as much as possible, and limit traceability.
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#2614

It’s eventually the same. UTXO is an acronym for the unspent transaction output, which in turn is a difference between input and output :innocent:

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#2615

Can the wallet manage different addresses? Good to know thanks. Have to check the settings of mine :slight_smile:

#2616

  1. UTXO’s are transactions made to your address as an output from another wallet that you have not spent. Basically incoming, unspent funds.

  2. UTXO’s need to be completely spent in one transaction. If one UTXO is not enough to complete an output the UTXOS will be pooled, spent, then the remainder will be returned to your address.

  3. Transaction fee is specified by the wallet looking at the current fee rate on the block chain and will choose a fee that is high enough for our transaction to clear in a reasonable amount of time for current network conditions. after the transaction has been made you can calculate the fee by Input - Output, the sum will be the fee charged.

  4. To increase anonymity you can send multiple transactions to wallets that you control and have not been linked online in any way to make them traceable back to you personally.

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