Homework on Bitcoin Transactions and UTXO - Questions

  1. Describe what Unspent Transaction Outputs (UTXO) are.
    Is the balance left in your wallet after a transaction

  2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
    The transaction will be denied because there are no available UTXOs to meet the minimum transaction amount requested.

  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    Because of the last tx fees on the blockchain

  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    From outside it is impossible to know, which transaction went where.

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1- as far as I understood UTXO would be the unspent btc from an input after deducting transaction fees.
2-the transaction would be denied and wont get confirmed
3- the wallet would calculate the appropriate fee for the transaction, but to calculate the fee after the transaction would be subtracting input - output
4- the fact that the exact spent output and unspent output aren’t completely transparent since we don’t know which amount was spent or sent to a different private key or returned back to the private key initiating the transaction

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

UTXOs are inputs received from another party or yourself, which are required to make transactions. They are unspent funds that can be turned into an output to make a transaction, becoming a UTXO for the recipient.

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

Your wallet would read the blockchain to determine your UTXO balance as a sum of individual UTXOs. If this sum covers the transaction, the entirety would be spent making the transaction, sending the remaining sends back to an address you control, and determining an appropriate fee. If the sum of UTXOs still wouldn’t cove you transaction, it would be declined, either by your wallet or at the latest by the nodes trying to verify the transaction, but discovering the private keys relating to the signature/public key hold insufficient funds

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

A bitcoin wallet would first deduct all outputs from inputs, and determine a portion of the funds being sent back to you as an adequate fee based on recent fees in the blockchain, to ensure your transaction commences promptly.

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

Even though transactions are publicly recorded, including the BTC value of your inputs, outputs and fees, it is impossible for anyone else to assign your different (possibly multiple) outputs to a person controlling the address (e.g. whether one is sending all funds to a different address controlled by oneself, all funds to another individual, or a mixture.

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  1. Received funds
  2. use more than 1 utxo
  3. by looking at the previous transactions on the blockchain.
  4. use multiple address from your wallet
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1.utxo is your unspent balance in your wallet.your wallet will query the blockchain for the utxo’s
2.some transactions are multipule utxo’s making up the total and the change is sent back to yor wallet
3.input-output=fee
4.always use a non custodial wallet the generates a new address,never use the same address more than once.

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Appreciate it Alko89 for clearing the answers for me. A newbie here still learning the ropes :blush:

  1. A UTXO is basically your balance. It is the input you have received from other wallets sitting on your wallet and has not been used as output
  2. If you do not have enough in a single UTXO then the wallet will see if there are other UTXOs available in that wallet. If so the block will be mined, if not the transaction will be declined
  3. The wallet will check with the network to see what a good transaction fee would be to get the block mined quickly.
  4. multiple inputs and outputs
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1. Describe what Unspent Transaction Outputs (UTXO) are.
UTXOs are the available funds that are left over after taking into account the all transactions and fee. Therefore, a UTXO is the balance available in a wallet for a particular private key.

2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
The transaction would fail to be verified and it would not be fully processed.

3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
One of the wallet’s role is to propose a transaction fee. This proposed fee would be determined from the transaction fees that are currently being offered and accepted by miners on the blockchain.

4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
Transactions are signed by a private key and are displayed as a public key to the blockchain. A transaction can involve multiple parties including sending part of that transaction back to oneself. An address does not have any personal information. Therefore, several outputs could be delivered to addresses that that originating sender owns and no one would know except the owner himself/herself.

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  1. UTXOs are unspent outputs of the previous transaction.
  2. The wallet would combine multiple input UTXOs
  3. The fee is calculated from the remainder of all inputs minus the outputs of a transaction.
  4. Send coins to an address that you control
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Actually a block will get mined either you make the tx or not :smile:

UTXOs are unspent outputs from a tx. A private key can have many of these, therefore the sum of UTXOs is the balance.

You can use multiple UTXOs as inputs to a new tx. If you still don’t have enough, then the tx will fail. :slight_smile:

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  1. They are the transactions received and that are ready to be spent. As long as they are not spent, they receive that name and determine the balance of the wallet.

  2. You would have to use more than one UTXO to cover the transaction, and if the amount is greater than what you want to spend, the rest will be sent to your account again, discounting the fees.

  3. Subtracting the Outputs from the Inputs.

  4. Creating more Outputs. In this way it is difficult to determine where the transaction is being sent.

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  1. UTXO is output from previous transaction
  2. Wallet will read blockchain to find all available utxo and sum them or transaction will be declined
  3. input-output=fee
  4. put more funds in input than need. by doing this will be more outputs
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  1. Describe what Unspent Transaction Outputs (UTXO) are.

    UTXO represents the amount of Bitcoin (or other digital currency) on the database, that someone has left after a transaction.

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

    If you did not have one single UTXO to cover the transaction another UTXO would be added, any amount left over would be are deposited back to the database as inputs.

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

    The fee would be represented as the difference between the amount output and the amount returned as input.

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

    You could use multiple outputs, as it does not known which output go to who.

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More inputs doesn’t mean more outputs. You can combine multiple utxo’s in the input and put them all on 1 output on a certain addres

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i understand what you saying, but i mean not that. if u need to pay 1btc and you put 2btc its makes 3 outputs, for recipient, for me and fee, by doing that harder to track which output is yours. something like that(i think). correct me

UTXO’s are transactions outputs which you have received in the past. It is basically the “balance” of your wallet.

Your transaction would be denied by the nodes. If your total UTXO balance is large enough, it will process it all and send the “change” back to your wallet.

It does that automatically depending on blockchain fee and transaction history. It does that on its own. Output - Input = fee

I dont quite understand the last question…but i looked at the other answers and from what i understand having multiple addresses could theoretically increase security though that is not 100% secure as they can still be tracked to you.

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You use UTXOs as inputs to a new tx. If you have 2 UTXOs of 1 BTC you would use 2 inputs to make a tx like you intend and it would have 2 outputs, one for the recipient and one to send the change back to yourself. :slight_smile:

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It will only puck as much UTXOs as required to fund the tx, not all of them. That would be unnecessary and would only increase the tx fee by making the tx more complex. :slight_smile:

Oh so if I have 3 UTXOs with 0.3 btc each and I want to send 0.3, it will only pick one and the others will remain untouched, correct?