Homework on Bitcoin Transactions and UTXO - Questions

Blockchain and Bitcoin 101
#401

  1. UTXO’s are outputs from previous transactions that haven’t been spent. Our balance in a wallet is the sum of UTXO’s previously sent to our wallet address.

  2. The wallet can combine different UTXO’s to construct the transaction. If the sum of all the available UTXO’s is less than the total transaction, it will be declined and you’re not able to do the transaction.

  3. Usually, the wallet checks what were the previous and current transaction fees on the previous blocks and applies it. In some cases, users can specify themselves the transaction fees to be applied.

  4. We can divide the input(s) into many different outputs for different addresses, making more difficult to track that transactions since addresses on the blockchain usually don’t hold any personal information.

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#402
  1. UTXO can be considered as the money I have and am able to spend.
  2. I have to use a combination of different UTXOs to feed a transaction.
  3. - - =
  4. Have multiple wallets -> buy something and the change send to another of my wallets.
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#403

Thank you Fabrice for clarifying!

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#404
  1. Describe what Unspent Transaction Outputs (UTXO) are.
  • UTXO (Unspent Transaction Outputs) are a sum total of your wallet that you have available to send on/spend.
  1. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
  • Nodes would confirm under consensus that you do not have enough UTXO’s and the transaction would be denied/cancelled.
  1. How would a bitcoin wallet specify the transaction fee when creating a transaction?
  • Fee = Input - Output
    (So if I had exactly 1 bitcoin and wished to purchase something for exactly 1 bitcoin - presumably the transaction would be denied as no spare UTXO???)
  1. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
  • Due to encryption it is unclear whom the UXTOs are output to and which (UTXO - change) is sent on to your wallet.
#405
  1. UTXOs are what you have left in your wallet
  2. you don’t do the transaction
  3. the fee is implied and is the difference between in and ouputs
  4. by making a lot of transactions.
    But doing so you’ll also pay some fee each time and deplete your amount of satoshi.
    is that correct??
#406

  • Describe what Unspent Transaction Outputs (UTXO) are.
    UTXOs are Transaction outputs they currently not used for inputs

  • What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
    if you have multiple small UTXOs, the wallet will sum this UTXOs to cover the transaction

  • How would a bitcoin wallet specify the transaction fee when creating a transaction?
    the wallet determines the tx fee for me based on my preferences i.e., one that approves my tx quickly

  • How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    use different wallets and addresses for your outputs

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#407
  1. Describe what Unspent Transaction Outputs (UTXO) are.

A UTXO or unspent transaction output is a transaction that has been sent to a bitcoin address and has not yet been sent to another bitcoin address. Once it is sent it becomes the input to a transaction and is classified as a spent transaction on the blockchain. In a bitcoin wallet the total amount of bitcoin would be the sum of all UTXO’s “in” the wallet. Your wallet tracks UTXO’s and queries the blockchain and determines which UTXO’s can be spent by it’s private key. I.e which ones are yours and can be spent.

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

The transaction could not be sent.

  1. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    Input = output + TX fee.

Every time a wallet sends a transaction it must input the sum of all of the UTXO’s that have been sent to it’s private key. Whatever is left from the amount sent is sent back to the address of the wallet. To specify a desired transaction fee the amount to be sent to another address would be specified along with the amount to be sent back to the sender’s address. The transaction fee would be the input minus the output.

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

Once a transaction is completed on the blockchain it only appears as an output from one address to either one or more addresses. The blockchain does not record who owns the addresses. Therefore the transaction is anonymous and therefore has a high degree of privacy.

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#408

  1. UTXOs are unused balances left in your Bitcoin wallet

  2. The transaction will fail and not be accepted into the blockchain

  3. Input minus output equals the fee

  4. Using different addresses for outputs

#409
  1. Unspent Transaction Outputs (UTXO) are The BTC sent from the sender to the recipient of a transaction. The recipient’s wallet would store and keep a running balance of the UTXO’s.
  2. If my wallet did not contain a single UTXO that was large enough to cover a transaction I was initiating it would simply combine however many UTXO’s it needed to cover the transaction including fees. Any extra BTC would be sent back to my wallet as change in the form of a new UTXO.
  3. A bitcoin wallet specifies the transaction fee when creating a transaction by querying the network to see what the various rates are for the various speeds of transacting. The wallet then gives the owner the choice as to which fee is appropriate. The blocks do not store the fees applied. They can be figured out by subtracting the input from the output of the Tx.
  4. I could use the notion of transaction inputs and outputs to increase privacy in my transaction by using many wallets. The transaction or the UTXOs or the blocks do not in and of themselves associate information with people. If you thought privacy of a certain wallet you owned was compromised you could send the funds to another anonymous address owned by yourself.
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#410

1-They are transactions that have been sent to your public Key in the blockchain, and your wallet uses them as inputs for your payments. They are basically the assets that belong to you, but they can only be reached with the proper Private Key.

2- Your wallet would combine as many UTXOs nedded to reach the required amount for the transaction, if you have enough.
.

3- That depends on the miner`s fees at the moment of the transactions, but the wallet would scan for the lowest fees available at the moment for you, to build the transaction.

4- One would think wallets actually store assets, but they just mainly manage private and public keys to broadcast and sync transactions, so it is better to use wallets that allow you to have your private keys, and store that info in a safe place

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#411

Yeah, many people made the same mistake :wink:

#412

You specify your utxo’s to spend in the input and you choose the destination with amounts to send to certain addresses. (wich are new utxo’s for the receivers)
So technically you can’t say input - utxo’s but input - output.

#413

First your Wallet will try to combine multiple smaller utxo’s together to cover the amount

#414

Your wallet will first try to combine multiple smaller utxo’s together to cover the amount

#415

When you don’t have a single utxo large enough, your Wallet will first try to combine multiple smaller utxo’s together to cover the amount.
Fee’s are calculated in satoshis per byte. So the more inputs and outputs you will use in a single transaction, the more block space you will need, so the higher the fee

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#416

Ah. Thanks for the correction! I was reading that to mean that your total combined UTXO amount was not enough to cover your transaction.

Fabrice

    April 5

Cweed:

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

Your wallet will first try to combine multiple smaller utxo’s together to cover the amount

#417

  1. UTXOs are transaction the receiver hasn’t utilize/spend.

  2. The wallet itself getting from the blockchain which UTXOs you still have and the wallet adds everything up hence, it uses a couple or more UTXOs for the transaction therefor the TX will be executed; The wallet decided which inputs to choose and from it which outputs to create.
    On the other hand, If an attempt will be made to spend/send something that you don’t have, nothing will happen - the nodes will ignore it.

  3. The fee is implied, it isn’t specified. In must wallet the wallet will propose a fee (that will get you fast enough to the blockchain) based on the previous fee. More to add Inputs-outputs= Transaction fee.

  4. You could create Inputs to multiple recipients and include your other addresses among them.

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#418

  1. UTXOs are bitcoin ledger inputs associated with an address (i.e. the value in a wallet).

  2. Several UTXOs greater in value than the trxn cost + fee would have to be gathered for the trxn. The trxn would generate a “change” UTXO for any unspent value and return it to the trxn sender

  3. Inputs - Outputs = trxn fee

  4. You could construct an trxn sending your UTXOs, or your “change” UTXOs, to a novel address that you own.

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#419

I see, I noticed that after the lesson. I appreciate your input. I welcome all the insight. Thanks Fabrice.

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#420

  1. Unspent transaction outputs (UTXO) can effectively be considered your available funds attached to your private key.

  2. If you don’t have any UTXO that equals your desired output plus fee then the transaction wouldn’t go through.

3.A Bitcoin wallet specifies transaction fees via the following formula: The Total Input - The Total Output.

4.I would increase privacy in my input/output transactions by having multiple receiving addresses for each transaction sent to me or maybe making a receiving address for each specific person or instance or money being sent to me.

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