Homework on Bitcoin Transactions and UTXO - Questions

Blockchain and Bitcoin 101
#4105
  1. Describe what Unspent Transaction Outputs (UTXO) are.
    An unspent transaction output is a transaction that was sent from a wallet to a second wallet but the second wallet hasn’t spent it yet. Once the second wallet spends it(sends it elsewhere), it becomes SPENT.

2.What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
The wallet would create a transaction using 2 or more UTXO in order to cover the ammount to be sent plus fees. The excess is sent back to the same wallet or a wallet controled by the same user.

3.How would a bitcoin wallet specify the transaction fee when creating a transaction?
The wallet would check the fee paid in the previous block to came up with a reasonable fee.

  1. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    We could send multiple transactions all to wallets we control, and 1 real transaction. It would be difficult to say wich one is the real one.
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#4106

That is good to know, thank you for furthering my understanding of that part!

#4107

  1. Describe what Unspent Transaction Outputs (UTXO) are.
    It is the ‘balance”of unspent transactions in your wallet

  2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
    If you don’t have enough UTXO in your wallet, your transaction will be denied/not able to be verified.

  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    Automatically generated by the wallet: transaction input minus transaction output = fee

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

Create multiple addresses for yourself and send multiple transactions to them. It would be almost impossible to know who they belonged to.

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#4108

  • Describe what Unspent Transaction Outputs (UTXO) are.
    UTXO are transactions on the inputting side. It is basically an unspent sum of currency listed as database in blockchain. You private key in the wallet will send the signal to read the actual sum of UTXO.

  • What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
    The wallet’s private key will search if you have sufficient sums of the currency in all UTXO to cover your transaction first. If your combined UTXO is large enough, a transaction can be carried out.

  • How would a bitcoin wallet specify the transaction fee when creating a transaction?
    INPUT = Output- fee is the basic equation for knowing the fee. However as Ivan puts it, the wallet will choose the fee that will is sensible in completing the transaction. The wallet will determine by looking at the current condition.

  • How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    No one can tell who is the sender or the receiver are because the transaction only specifies the key or strings of data in letters and numbers.

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#4109

The sum of all your UTXOs is your balance.

You can use multiple UTXOs as inputs to a new tx. If you still don’t have enough then your tx would be denied. :slight_smile:

#4110

What about in case when you withdraw from an exchange where you did KYC? :wink:

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#4111

True. In the end they can trace to the exchange. But once you pull it off the exchange, you cannot trace it easily any more correct?

#4112

@Alko89 Thanks ^^
Amazing community :slight_smile:

#4113

  1. UTXO’s are inputs to you from the blockchain that your wallet gathers and helps you generate TX’s.

  2. If you don’t have a large enough UTXO for your purchase you must either find more UTXO’s that will satisfy the transaction or you must alter your transaction plans (not buy or buy for less or find an alternative transaction that can meet your total UTXO’s)

3.The wallet would specify a transaction fee by giving you your specified transaction minus the amount you are sending back to yourself and the unspecified amount between all your UTXO’s and your TX’s would be the undefined transaction fee that your wallet figured would get you the transaction accomplished in a reasonable amount of time.

4.You could increase privacy by using your UTXO to send to at least one other address wallet that you control before making your purchase, as well as using those other wallets to complete the intended transaction through smaller transaction amounts from multiple wallet sources.

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#4114

  1. UTXO’s are a log that the blockchain saves to inform you of which transactions you received that can be spent as they have not yet been spent and then shows you a balance of these in your wallet.

  2. If you do not have any single UTXO large enough to cover a transaction then multiple UTXO’s will be added together to cover the transaction and if the amounts are greater than the amount you are spending in the current transaction you will have the change returned to your wallet.

  3. A bitcoin wallet will specify the TX fee when creating a TX by taking a look at the blockchain to see the previous fees and based off of that information will give you a fee to pay that will get you into the blockchain fast enough.

  4. TX inputs and outputs provide anonymity by only providing the addresses on the blockchain belonging to the sender and the receiver and if the outputs are split over multiple addresses the blockchain does not show the seperate amounts sent to each address but in fact only shows the total output amount giving greater privacy to each individual involved in the TX.

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#4115
  1. Describe what Unspent Transaction Outputs (UTXO) are.
  • no coin resides on any Node or wallet, all that exists are transactions that have not been spent, or, briefly, spent. All unspent transactions reside on the blockchain as Unspent Transaction Outputs, These all serve the purpose as INPUTS (or Unspent Outputs). As soon as the INPUTS are bundled into a transaction they become OUTPUTS and are spent whereupon they become Unspent Transaction Outputs
  1. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
  • UTXO’s are bundled together to more than cover the transaction (with fee) and sent as payment. The balance remaining (or change) is returned to the wallet
  1. How would a bitcoin wallet specify the transaction fee when creating a transaction?
  • the wallet recommends a fee that will see the transaction processed wothin a reasonable time. (Mostly done automatically)
  1. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
  • firstly inputs are bundled together to create one output. A changing wallet address (like Bitpay) cahnges address with each transaction.
  • secondly the return (or change address) could be different
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#4116

  1. Describe what Unspent Transaction Outputs (UTXO) are. Transaction outputs that have been sent to a certain address that can be spent in the future

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

You or your wallet has to specify a combination of UTXO’s that is greater than or equal to the total transaction outputs.

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

It will query the blockchain and recommend a fee that will get the transaction processed in a reasonable amount of time.

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

Always generate new addresses, especially the outputs, so that it is hard to tell which output goes back to the sender.

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#4117

Correct, but technically the link remains so the funds can still be followed to a degree. :slight_smile:

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#4118

I understand that a TX is comprised of a number of individual transactions to more than cover requirement and fee.
HOWEVER - how is the ‘change’ sent back to the orginating Wallet? If TX’s cannot be broken up where is the change sourced from?
Other exact sized TX’s? (seems unlikely)

#4119

A transaction is comprised of inputs and outputs, not transactions. The inputs to a transactions are UTXOs (Unspent TX Outputs) and the outputs become new UTXOs.
To get the change back to your wallet must construct an output (new UTXO) back to it, if this is not specified the remaining change will go to the miner as a tx fee. :slight_smile:

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#4120

  • Describe what Unspent Transaction Outputs (UTXO) are.
    Unspent Transaction Outputs [UTXO] can be described as unspent outputs from previous outputs.

  • What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
    If any single UTXO is not enough to cover the transaction; the transaction is invalid.

  • How would a bitcoin wallet specify the transaction fee when creating a transaction?
    The fee is equal to the remainder of all inputs, subtracted by the sum of the outputs.

  • How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    Increased privacy can take place when utilizing the generation of new addresses for each receiving transaction.

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#4121
  1. Describe what Unspent Transaction Outputs (UTXO) are.

UTXOs are the outputs produced by transactions. They belong to the address to which they were sent until they become an input for a new transaction.

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

You would use multiple UTXOs to cover the transaction and the fee.

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

The inputs = the outputs + the fee.

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

Transacting in Bitcoin is inherently very private, but you could choose to use several different addresses to increase privacy.

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#4122
  1. The set of received transaction outputs which have not been spent.
  2. The transaction would be invalid and would not be added to the next block.
  3. It’s not declared, but it is the difference between total inputs and total outputs. Usually, it’s high enough so that miners are likely to add it to the block they’re creating.
  4. You can “shuffle” UTXOs across different addresses of which you’re the owner.
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#4123
  1. UTXO are simpy said: bitcoins available to spend by whomever controls the private and public keys connected to the adress that these bitcoins where send to.
  2. Combining several UTXO to cover a transaction is possible, if no sum of UTXO cover the amount specified in the transaction, confirmation can not happen.
  3. Either manually bu user or a Wallet will propose a fee according to historic data.
  4. If a user decides to always spend the complete amount of UTXO available, and transact the so called change from a transaction as a UTXO to a new address that is controlled by same user, anonymity is increased.
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#4124
  1. Unspent Transaction Outputs (UTXO) is the total of the wallet balance.
  2. The transaction wouldnt go through and it would be declined.
  3. The difference between inputs and outputs. It is automatically specified.
  4. You could use many inputs and outputs, which means that you can use several adresses and outputs can result from one input.
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