Homework on Bitcoin Transactions and UTXO - Questions

Blockchain and Bitcoin 101
#4365

  1. Describe what Unspent Transaction Outputs (UTXO) are.
    They are the transactions with unsent-spent BTC… used to create wallet balance.

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

  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    Its shown by the net of the Input - the output = Fees

  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    by creating multiple btc private keys within the same wallet

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#4366

1, utxo are your total wallet balance
2, no transaction
3, UTXO - UTXO input= fee
4, use different addresses for outputs

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#4367

Hey Guys - I did my homework on this a few days ago and since had a pullback with my understanding. Can someone help here?

Ivan said: ‘inputs = outputs + Tx fee’ – I’m struggling with this because he also said ‘I can tell my wallet to construct a fee that is 0.1’, then he said ‘you never specify the fee’. :slight_smile:

Questions are:

Q1 Does the wallet specify the fee? or the miner?
Is the fee known before the transaction is completed? or can I be surprised at the end? My understanding is that the wallet will estimate, but the miner sets it (and picks the hardest transaction it can (most UTXOs) to maximise their fee. And if I don’t know how much the Fee is before I do the transaction then… that’s a bit daft isn’t it?

Q2 Say I have 2 BTC(2 UXTOs with 1 BTC each) and I send my 2BTC to purchase something worth 1.1BTC. I would expect some ‘change’ (0.9BTC) but using Ivan’s wording the fee would be 0.9 BTC. That doesn’t make sense to me and I’m sure it’s not right, but can you explain it to me?

ps/ this is the video I used to help me understand: https://www.youtube.com/watch?v=EHYDeORj_tc but I need the above answered to solidify it in my mind. Maybe I shouldn’t post videos to non-Ivan material :slight_smile:

thanks for help

Alan

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#4368

Describe what Unspent Transaction Outputs (UTXO) are.

UTXO’ s are the funds you can spend. Your wallet sums the UTXO ‘ s on the blockchain that have been sent to your adress and displays their sum as your overall balance.

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

The wallet would choose several UTXO ’s that together could cover the transaction

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

Tx fee= input-output. The wallet calculates the optimum tx fee that would allow to proceed the transaction.

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

By looking on the transaction it is not possible to tell how much funds were sent to other parties and how much did you send back to yourself. Thus hard to tell the actual amount that was sent to someone, it can only be estimated.

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#4369

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

#4370

The wallet constructs a tx behind the scenes as you specify but its not specified but implied as the difference between inputs and outputs.

The wallet or the user of the wallet specify the fee as they see fit. Wallets usually determine a proper value for the tx to be processed in a timely manner.

The fee has to be determined when the tx is being constructed, you can’t set it once the tx is allready in the mempool.
You can however broadcast a new tx using the same UTXOs with a higher fee which will insure the tx will be processed faster and will invalidate the original tx once the new one is confirmed.

The change is sent back to you as new UTXO that can be spent. The wallet does this for you. If however you would go make a raw tx by yourself then you must specify this or you would create a tx wit a fee of 0.9 BTC and make one miner very happy. :slight_smile:

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#4371

that’s awesome, thank you - all making sense!!

#4372

From the previous transaction you have unspent outputs. E.g. you have an input of 1 BTC and an output of 0.2 BTC. Hence the UTXO will be 0.8 which is basically the balance you still have.

Well, nothing will happen since the UTXO cannot cover the transaction.

The wallet goes on the blockchain to check the “current” transaction fee. It’s either done automatically or you can also adjust it manually in case you want to speed up the transaction and pay a little bit more to the miner.

Have multiple inputs and multiple outputs for one transaction. One or multiple can be your own or even all of them.

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#4373
  1. The unspent outputs from prior transactions. “Change” if you will.
  2. If Available, another UTXO would be grouped to pay the full amount. You would receive the difference of the total minus the transaction fee as “change”.
  3. Input - Output = Fee
  4. By using multiple addresses controlled by the same person/entity. The “muddier” the trail, the harder it is to definitively track.
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#4374
  1. UTXOs or Unspent Transaction Outputs are transaction outputs received to a wallet, they must be spent in full to complete a new transaction with the funds from the previous UTXO. Often times there are three outputs, the initial target, a transaction fee and the remain amount of the UTXO being sent back to the initial address.
  2. You would have to use as many UTXOs as needed to cover the transaction balance.
  3. A bitcoin wallet calculates the fee amount by finding the average fee amount based on surrounding nodes in order to process the transaction in a timely manner.
  4. By bouncing funds between accounts and using the provided anonymity of BTC wallet addresses you can make it very difficult to track the intent of your transactions.
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#4375

  1. Describe what Unspent Transaction Outputs (UTXO) are.
    It is unspent funds(bitcoin) from a previous transaction.

  2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
    It would decline the purchase of any bitcoin, until funds become available.

  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    Transaction fees are based on the differences of inputs and outputs, giving you a fee according to the amount of bitcoin purchased.

  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    Having multiple addresses creating unique accounts.

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#4376

  1. Describe what Unspent Transaction Outputs (UTXO) are.
    The total amount of your wallet is the sum of all the UTXOs. It tracks the amount you can spend, and always have to equal the output + transaction fees when spending/sending it.

  2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
    You will not be able to send the transaction.

  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    Most of the wallets will auto calculate the average transaction fee in order to get your transaction processed by the miners. Your total spent plus transaction fees can not be greater than your total wallet balance amount.

  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    Send your transactions to another wallet address as receiving address that you own.

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#4377

1 UTXO is the balance in the wallet. Funds received that can be spent.
2 If I do not have UTXO to cover the transaction then the transaction will not be executed.
3 Inputs minus outputs equals fees.
4 I can use a new address for each new transaction.

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#4378

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 not be executed. :slight_smile:

#4379

  1. Unspent Transaction Outputs. An output from a transaction to a recipient that is yet to be spent

  2. All UTXO’s are added together. If this value is larger than the planned output, then the transaction can take place.

  3. Fee = Input - Output

  4. Use several different addresses for the outputs

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#4380

1/ UTXO equals the balance you have on one address of one of your wallet: then, it is all inputs for this address when you use it to broadcast an output, part of this transaction
2/ transaction will be denied
3/ when spending from UTXO, fees = sigma (outputs) - sigma (inputs)
4/ in using a different address each time you teceive an input

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#4381
  1. UTXO are unspend transactions in your wallet that you’ve received earlier on.
  2. Transactions won’t be valid, thus unable to be sent.
  3. Fee = input - output
  4. The use of multiple addresses once transaction takes place.
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#4382

Your wallet will calculate the sum of your total unspent transactions to equal the amount needed, if not enough the transaction is not allowed to take place.

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#4383

  1. They are the sum of the inputs you’ve received and have not spent yet. Essentially, bitcoin (or any other crypto currency) you have remaining in balance in your wallet from bitcoin being sent to you.

  2. You would be unable to complete that transaction. It will be rejected.

  3. Input minus output.

  4. You don’t know the address (output) owner of the transaction(s)

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#4384

  1. Describe what Unspent Transaction Outputs (UTXO) are:
    They are the Bitcoin amounts you have received in your wallet that you have not spent or directed yet. The UTXO transitions into your wallet or is spent as you direct the BTC funds.

  2. What would happen if you don’t have any single UTXO that is large enough to cover for your
    transaction?
    After the Blockchain node review, insufficient fund transactions are cancelled by the Blockchain Ecosystem automatically. Since the UTXO funds must be directed, it seems as though the initial transaction must be directed to yourself and then a new transaction generated from your wallet that has the necessary funds to complete the purchase including the “Fee” we are now discussing.

  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    Bitcoin transaction fee is an implied sum as the owner directs the transaction. The wallet serves as the price execution mechanism as it directs the miners to the terms of the transaction. Since the miners “choose” which transaction to do first based on what is the most profitable calculation / which is the highest transaction fee first - it may take a bit of time to record / cure your transaction if you are cheap with the fee you are willing to pay.

  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    **Since inputs = outputs, the notion of a transaction can increase privacy by sending the UTXO’s to yourself first. Since Blockchain / BTC transactions are encrypted, the transfer mechanism keeps the directed funds a secret as it is stored back to the blockchain network. Random alphanumeric codes in blockchain keep the transaction (TX) confidential. **

rjr
2021-03-03T05:00:00Z

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