Homework on Bitcoin Transactions and UTXO - Questions

Blockchain and Bitcoin 101
#3221

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

#3222

Thanks for clarifying!

#3223
  1. Unspent Transaction Outputs (UTXO’s) are funds from previous transactions sent to a wallet that have yet to be spent. The sum of UTXO’s in a wallet is the user’s balance in the blockchain.
  2. If you do not have a large enough single UTXO you can combine to have multiple inputs into the new transaction. If you do not have enough total, then the transaction will be thrown out.
  3. Wallets do not specify the transaction fees, it is always the difference between inputs and outputs, so it is always apparent.
  4. Can hide the true nature or purpose of any transaction within multiple inputs and outputs as well as utilizing numerous addresses controlled by the same person.
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#3224

  1. The bitcoin blockchain consists of a sequence of transactions organized in blocks. Every block has a number of transactions, and every transaction has one or more inputs (except for the coinbase transaction) and one or more outputs. Every input corresponds to an address and every output corresponds to an address and you are transferring value from the input addresses to the output addresses.
    A UTXO is an output that has not yet been spent. You spend your output by making it an input in another transaction, thus transferring its value to new addresses. A UTXO can only be spent in its entirety, it cannot be divided. Once a UTXO is used as an input in a transaction it is considered to be spent and ceases to be a UTXO.
    The sum of a wallet´s UTXOs is its balance.

  2. You can use any number of UTXOs as input in your transaction. Provided that you have enough UTXOs in your wallet you can combine suitable UTXOs to add up to an amount of bitcoin that is higher than the amount you want to transfer and use one output to send the change back to yourself.

  3. The fee is not stated explicitly in the transaction but is simply the difference between the input and the output.

  4. You could create transactions with a very large number of inputs and outputs, thus masking who is sending what to whom.

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#3225

  1. UTXO stands for unspent transaction outputs. Like saying change, that u get back, since you must always spend entire UTXO.

  2. The transaction would get rejected by a node already before putting it into the mempool. Invalid tx. But if you have more UTXOs, the wallet will try to sum it up and if the balance would be enough, you will get your TX confirmed.

  3. TX FEE = transaction Input(s) - transaction output(s)

  4. If possible earn BTC, get paid with it for your services, or buy it in anonymous CASH ATM machine, or directly from miners or via OTC. Then create always a new receiving address for every transaction. And of course use a Ledger or similar, and not a wallet where u don’t own the private keys, lE KYC-ed CEXs

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#3226
  1. UTXO’s are outputs from previous transactions that will serve as your input to be spent.
  2. The wallet will combine different UTXO’s that will be enough to cover the transaction.
  3. By checking previous transaction fees on the blockhain.
  4. There are only Bitcoin addresses as inputs and outputs that give a total privacy to the owner of that address.
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#3227

Don Michelin - Answers

  1. Unspent transactions are all of the inputs of a transaction that need to be spent.

  2. The transaction would fail if the collective UTXO’s aren’t large enough. If the collective UTXO’s are enough the transaction would go through.

  3. It would get taken out of the total output. The since the outputs are split in the transaction between yourself and who you intend to send the asset to the fee would be taken out of your own portion of outputs vs who you are sending them to.

  4. You could split the funds up that you want to keep across multiple wallets.

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#3228

  1. Unspent Transaction Outputs (UTXOs) make up the balance in your bitcoin wallet.

  2. If you don’t have any single UTXO large enough to cover for your transaction, the transaction will be denied for insufficient funds.

  3. A bitcoin wallet specifies the transaction fee when creating a transaction by subtracting the outputs from the inputs and using the remainder as the fee.

  4. One could use the notion of transaction inputs and outputs to increase privacy in a transaction because multiple inputs and outputs can be used, thereby making it harder to track specific wallet addresses.

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#3229
  1. Unspent Transaction Outputs (UTXO) are the messages constructed by the WALLET and SENT to the Blockchain NODES defining what the transaction should do. There may be several output UTXO’s from a transaction and one of these may be a transaction sent back to the OWNER of the WALLET which specifies the Balance left over from the SUM of the INPUT UTXO’s and the TRANSFER part of the output UTXO which is credited back to the WALLET.
  2. IF you don’t have any single UTXO that is large enough to cover for your transaction then a number of UTXO’s will be SUMMED into the ONE transaction message to cover the OUTPUT required plus the remaining balance credited to the WALLET.
  3. A bitcoin wallet specifies the transaction fee when creating a transaction by referring to similar txns completed recently and finding the best match and the fastest value that will get the txn completed.
  4. You can use the notion of transaction inputs and outputs to increase privacy in your transaction by sending the OUTPUT UTXOs to addresses that belong to yourself.
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#3230
  1. The are the inputs into your own wallet that you have not spent yet
  2. Your UTXO is combined and the difference added back to your wallet (less the fees of course)
  3. It would be the balance left over being the fees
  4. With the use of an off chain (cold) wallet
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#3231

Homework on Bitcoin Transactions and UTXO - Questions

Describe what Unspent Transaction Outputs (UTXO) are.

A. Wallet private key controls the UTXO’s, however you must have at least one input sitting in your wallet. You can have multiple inputs sitting in it as well.

Blockchain keeps TX’s not sums; the wallet keeps sums of UTXO’s available to spend. When wallet sends UTXO’s to spend it also includes fees; any money left over goes back into your wallet balance.

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

A. Tx declined - and you need more input to try again.

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

A. 1st it would propagate a recommended fee from subtracting input from output. You can choose that fee, or select a different one. Miners give higher priority to Tx’s with the highest fees 1st. The more you lower the fee, probably have more wait time on the Tx.

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

A. Multiple addresses for output that are already anonymous.

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#3232
  1. Describe what Unspent Transaction Outputs (UTXO) are.
    UTXOs are the transactions you received, but didn’t spend.
  2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
    You would have to use several UTXOs until the amount is high enough and send the “change” back to yourself.
  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    It specifies the tx fee by looking at the blockchain to determine what fee would be reasonable so that the tx is integrated in the blockchain at a reasonable amount of time.
  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    By using more UTXOs or a higher volume so you have to send some “change” back to yourself. Nobody can determine which part you sent to another recipient and which you sent to yourself.
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#3233

Describe what Unspent Transaction Outputs (UTXO) are.
A: They are the transactions that are inputs to your wallet, but outputs from the wallet you received them from. Basically the available sum in a wallet is the sum of UTXO’s
What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
A: You can’t spend more than is in your wallet, so the transaction would not be created or broadcast to the network.
How would a bitcoin wallet specify the transaction fee when creating a transaction?
A: It specifies it as the Sum of the inputs - the sum of the outputs = fees
How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
A: Increasing the number of INPUTS and OUTPUTS will increase the level of privacy.

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#3234

  1. UTXO’s are unspent funds that you have received from others.

  2. If you don’t have enough UTXOs to cover your transaction your wallet will tell you that you are not allowed to send that amount.

  3. The BTC Wallet will specify the transaction fee by creating a fee amount based on the current running transaction fee. This will make sure that your currency is mined as quickly as possible by giving the miners a worthwhile reward. It would then subtract that fee from the total amount you are looking to send. After this, you will then be left over with the amount that is actually going to be sent to the wallet(s) that you chose.

  4. Transaction inputs and outputs promote for a lot of privacy due to the fact that it can be difficult to tell whether or not the funds you sent were to a wallet that someone else owns or a wallet that you own. This makes it completely anonymous.

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#3235

  1. Describe what Unspent Transaction Outputs (UTXO) are.
    An amount of funds received to a wallet that can be spent in the future. They are the input to your wallet and the output from someone else’s wallet.

  2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction? You would have to use a number of utxo’s that exceed the amount required. The difference would then be refunded to yourself, minus any fees of course.

  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    Your wallet scans the blockchain for recent transaction fee costs and recommends a fee based upon this. inputs = outputs - tx fee

  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction? You could create multiple addresses and send funds to yourself over and back between them, effectively masking the amounts and who they have been sent to. It’s not a perfect system for privacy in my opinion.

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#3236

UTXOs are unspent assets on the blockchain. They are what make up your Bitcoin wallet balance.

Your wallet would select as many available UTXOs as it needed to fulfill the transaction. Any remaining/excess value is returned to your wallet within the same transaction.

Most Bitcoin wallets assess the current activity levels on the blockchain and suggest fees based on the desired transaction speed. There is also the option to set a custom fee.

Each wallet consists of many private keys (addresses). Their UTXOs are all added together and result in the total wallet balance. Therefore, if you were to over-allocate your available UTXOs for any given transaction, you could hide your actual transaction in the noise and send the excess back to your wallet, via multiple different addresses, all within the same transaction. This makes it almost impossible to track individuals across the blockchain, only the assets themselves.

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#3237
  1. Describe what Unspent Transaction Outputs (UTXO) are.
  • It’s the balance of your account (to put it another way -> it’s the difference between all incoming and outgoing transactions, the spendable amount of BTC).
  1. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
  • Then another UTXO has to be used, otherwise transaction will be invalid.
  1. How would a bitcoin wallet specify the transaction fee when creating a transaction?
  • Transaction fee is estimated based on the current state of blockchain.
  1. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
  • You can create multiple addresses and transfer UTXO onto them (and from outside it’d be really troublesome to establish who was a real recipient - was it you or maybe a third party?).
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#3238

1.How a wallet construct a transaction
2.The transaction is not performed
3.The fee is going to be the inputs minus the outputs, the wallet calculates the best fee
4.You can have more than one wallet address

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#3239
  1. UTXOs means Unspent transaction output. It is essentially your wallet btc balance. The blockchain tracks how many UTXOs you have available to spend.
  2. The transaction would not complete because it cannot verify that you have UTXOs you are trying to send.
  3. It’s all done automatically through the blockchain.
  4. Create multiple addresses and send funds to yourself since no one can prove who owns them.
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#3240

Describe what Unspent Transaction Outputs (UTXO) are

  • A UTXO is the concept of how the wallet constructs a transaction
  • UTXO’s define where each blockchain transaction starts and finishes
  • UTXO’s are unspent transaction outputs, the amount of Bitcoin you have

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

  • Transaction could not happen

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

  • Transaction fee is calculated by the total input minus the total output
  • The wallet constructs the transaction, decides which inputs to use and which outputs to create and calculates the fee

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

  • You could use a new bitcoin address for each transaction, using the same address more than once reduces anonymity
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