Homework on Bitcoin Transactions and UTXO - Questions

Blockchain and Bitcoin 101
#4405

1, Describe what Unspent Transaction Outputs (UTXO) are.

  • It is your balance that you can spend.

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

  • Transaction will be declined by nodes.

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

  • Input - Output = Fees
    Wallet suggests a fee based on previous similar transactions.

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

  • To increase privacy use different inputs and outputs.
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#4406

A.1. Unspent Transaction Outputs (UTXO) pertains to the remaining amount of cryptocurrency after a transaction has been executed. UTXO are responsible for starting and ending a transaction. Meaning, when a transaction is completed, any Unspent OUTPUTS are put back into the ledger as INPUTS which can then be used for a new transaction. UTXO can be compared to a change received after a cash transaction is executed.

Hence the rule:

INPUTS = OUTPUTS + TX fee (TX is the abbreviation for transaction)

This means, all the money in the wallet (INPUTS) moves out of the wallet (OUTPUTS) every time a transaction occurs i.e. (1) part of the money is spent; (2) other part pays the fees; and (3) the remaining is put back into the ledger as new INPUTS—assuming that there are enough funds for the transaction to take place; otherwise, the transaction is simply rejected.

NOTE: The ledger is hardcoded to empty or zero. When a transaction is completed and there are OUTPUTS that were not spent, these are sent back into the ledger as new INPUTS which can then be used for a new transaction.

A.2. If there are not enough UTXO to cover a transaction, the transaction is simply rejected by the Blockchain network.

A.3. A Bitcoin Wallet specifies the TX fee by simply calculating the difference between INPUTS and OUTPUTS. TX fees are paid to miners. Miners choose higher TX fees available on the Blockchain network.

A.4. Using “Blockchain Explorer” platform—a transaction uses multiple UTXO addresses. It is impossible to pin-point which UTXO addresses correspond to the sender or to the recipient. In some cases multiple UTXO addresses can belong to the sender or to the recipient. An UTXO address that is then the new INPUT address can or will differ from its previous INPUT address i.e. no one on the Blockchain network can track the amount of funds allocated to a particular wallet. This method further increases anonymity and privacy.

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#4407

1- An UTXO is basically all credit that has been sent to your wallet and yet you have not made use of or spent. All this credit is available for your use, and until then it remains known as UTXO because it is normally the output of a previous transaction with you as recipient.
2- In case one single UTXO is not enough for a transaction, your wallet combines multiple UTXOs, and what remains is sent back to your wallet as a new UTXO.
3- The transaction fee = Input - Output
4- You can increase privacy by using multiple inputs and outputs in transactions, and also by having more than one address to receive transactions; i.e. more than one wallet.

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#4408

As I understand it each transaction is a ‘zero sum game’ of a sort. Of course if you have a single UTXO that contains enough value to cover your intended TX then you will be able to proceed. However, ALL of your UTXO’s will be utilized in the TX. All inputs in, All out. So as to speak to your example just because you have a single UTXO that equals or exceeds what you require to complete a TX, ALL your UTXO’s will be calculated together. Then outputs that total the value of 1 - the intended payment(s), 2 - the fee(s), and the total unspent balance remaining will be generated. You will then have a new single UTXO for future use.

#4409

UTXO’s are the trancations received to your wallet which you may spend for your purchases.
2.
if apart form that one there are other UTXO and combined they’re equal to your transaction + fee then it is possible, otherwise it cannot be done.
3.
.Bitcoin wallet calculates a fee in sucha manner that it will be put to blockchain fairly quickly. it is still possible to adjust fee to pay less, but at the cost of the speed of the transaction.
4.
Use multiple addresses for example.

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#4410
  1. In a bitcoin transaction, it works a little differently than a bank account to bank account/fiat transfer. A portion of the input cannot be precisely sent over, the entire input must be. Thats where the UTXO comes in.

If you have 2 BTC and you want to buy 1 BTC, modern wallets will automatically send the 2 BTC over, but will send 1 BTX to the seller and 1 BTC back to the buyer. Nowadays, this is all done under the hood and most people do not notice this.

  1. 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.

  2. How would a bitcoin wallet specify the transaction fee when creating a transaction? The transaction fee is calculating the difference the input and the output of the transaction.

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#4411

1 Its the transactions i’ve received to my wallet that i havent spent yet.
2. The transaction wont go through
3. My wallet checks the blockchain and calculate the fee that will go through
4. By creating more output adresses

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#4412

  1. A UTXO is the balance of inputs that hasn’t been spent yet (outputs) and lays your wallet.

  2. The transaction won’t go through.

  3. A transaction fee is input - output. The wallet will automatically calculate the fee.

  4. By adding several outputs to different addresses, including one output that goes back to you.

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#4413

You don’t need to use all of them. The wallet can cherry pick UTXOs so there are enough to fund the tx. Using all of them would kind of be just a waste of block space and would increase the fee. :slight_smile:

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#4414

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:

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#4415
  1. Sum of all UTXO with your wallet address represent amount of the bitcoin you own.
  2. Then you do not have asset to pay fee. Transaction would not be accepted to the blockchain.
  3. Wallet check recent transactions fees in the blockchain.
  4. You can generate new bitcoin address for every transaction and send bitcoin back to you.
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#4416

  1. UTXO’s are outputs of a transaction that have not been spent yet but they can be spent. UTXO’s will also show your balance.

  2. The transaction will be denied if you do not have the UTXO’s to complete the transaction, therefore, it will be rejected.

  3. A bitcoin wallet will specify the transaction fee automatically by subtracting the fee from the input to yield the total output.

  4. When using the notion of transactions, you are able to send outputs to the same wallet as the input was sent from, therefore, you can increase your privacy by sending it to a different “address” but still send them to the same recipient.

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#4417
  1. Describe what Unspent Transaction Outputs (UTXO) are.

Unspent transaction Outputs (UTXO) are inputs that a wallet receives from a previous transaction and are waiting to be spent in another transaction.

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

If one UTXO isn’t enough to pay the transaction, the wallet grabs another UTXO to cover the transaction and sends the difference back to your account. If the case is that there’s no other UTXO, the transaction can’t be made.

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

The transaction fee it’s implicit in the transaction made. If we have in consideration that the formula of transaction made has to follow the rule of all Inputs have to be equal to all outputs plus transaction fees then it’s possible to reach the equation of transactions fee are equal to inputs minus outputs.

All Transaction have to follow the rule of Inputs = Outputs + Transactions Fees

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

In order to increase the privacy of a transaction it’s possible to send money in one transaction to a differentes addresses and those addresses can be from different persons or anothers addresses in your possession. This would increase privacy because there’s no way to find out if that address belongs to the same person.

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#4418

An UTXO is essentially a wallets balance, which previously came from a different wallet.

If you do not have enough to cover the transaction, it will not go through.

The wallet can specify how much gas to pay, the more gas, the more likely the transaction will be confirmed faster.

You could send the btc to another wallet of your, splitting up the transaction.

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#4419

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

#4420

  1. UTXOs are unspent outputs from prior transactions associated with your wallet private key.

  2. Smaller UTXOs will be summed up, if the sum of smaller UTXOs is insufficient the transaction will fail.

  3. The fee is calculated from the result of (input - output) and comparing against recent TX fees on the network and considering the volume of transactions on the network. More transactions = Higher fees ( fees being incentives for miners to mine blocks, thus confirming transactions)

  4. Using multiple addresses owned by the user as recipients of outputs, transacting further from these new user-owned addresses to the ultimate desired address. ( the more addressed and more transactions the more privacy, though fees will be incurred)

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#4421

1_ these are values you have received as inputs that you can spend as whole, combined or partly. one could say monatary notes.

2_ your wallet will combine several until the target value plus the transaction fee is adequate, any change will be send back to your wallet as utxo. If this is still not enough, the transaction will fail.

3_ Total utxo used minus target value. so input - output. or in extreme cases I think your wallet will calculate something reasonable on past transactions.

4_ Adding multiple output addresses including your own

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#4422

  1. Describe what Unspent Transaction Outputs (UTXO) are.
    Input transactions that can be used for output 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 not be valid

  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    The wallet will find the best solution for the transaction for the input and output since they are always equal

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

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#4423

  1. Describe what Unspent Transaction Outputs (UTXO) are.
    UTXO’s are outputs of previous transactions that you were the receiver and you did not spend.

  2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
    If no single UTXO’s are large enough then the wallet will compound more than one UTXO to cover the transaction even if the sum of the chosen UTXO’s is larger that the intended sum. The remaining sum will be sent to yourself.

  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    The fee is specified either by seeing the difference in input and output, the difference being the fee or it will look at the recent transactions fees and choose and appropriate sum to be the fee in order to get in the blockchain at a reasonable time.

  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    You could have different inputs and outputs in one transaction that are owned by you in order to have more anonymity .

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#4424
  1. UTXO’s are outputs of a transaction that have not been applied yet.
  2. The transaction can’t take place with a single UTXO and will use multiple UTXO’s to facilitate the transaction. Any amount in excess of the transaction is returned similar to change with cash except as UTXO.
  3. Inputs - Outputs
  4. The owner of the inputs can be the owner of the outputs.
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