Homework on Bitcoin Transactions and UTXO - Questions

Blockchain and Bitcoin 101
#441
  1. Describe what Unspent Transaction Outputs (UTXO) are.

A UTXO is input of the amount of bitcoin in a wallet.

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

The transaction would be rejected by the nodes and miners.

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

Total inputs minus Total outputs

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

Once a transaction is sent, it uses the entire UTXO and results in a new address.

#442

  1. UTXO´s are all funds that you have received from someone to your wallet and which you have not spent yet. for example you get your salary 3000 Euros and you get 50 euros from your brother. this is money that you have received and that is waiting for you to be spent. if you summarize both transactions you have 3050 euros in total that you own and that you have not spent yet. therefore those are UNSPENT transaction outputs.

  2. There are two answers two this question both coming from different scenarios.
    first scenario: you want to buy something for 1 bitcoin but the only UTXO that you have is in total 0.5 bitcoin. if you tried to buy this item for 1 bitcoin the Wallet/nodes would tell you that this transaction is impossible as you dont have enough. they will ignore your attempt to spent more than you have.

second scenario you want to buy something for 1 bitcoin and you received 0.7 bitcoin and 0.9 bitcoin earlier, that you haven´t spent yet.
if you wanted to pay for this item that costs 1 bitcoin you have to pay the combined amount of your UTXO´s as none of them is large enough to cover the payment alone
you will then get the change of the transaction back (-minus fees)

QUESTION: What I didn´t understood from the video was, do I always have to spent the TOTAL amount of all UTXO`s to in a transaction for something? for example I want to pay 1 bitcoin and my UTXO´s are 0.6 btc, 0.2btc, 1btc and 2 btc. will the wallet sent my UTXO with 1 btc+fees OR will it sent the total of 3.8 btc that I have in my wallet and sent the rest back to me?

  1. BTC that you receive are UTXO, BTC that you spend are so called Transaction inputs, the transaction fee will always be the difference of input and output.

4.in a transaction you will pay all your bitcoin which will be split up in parts to the adresses you want them to go to. in a block you can then see this transaction history. If you were to send the change of a transaction to different addresses that you personally own it will be very difficult to figure out which of these addresses is the address that you wanted to pay and which are your own addresses where you sent the rest change to.

#443

1 UTXO is the inputs of coin that are tracked by the wallet.
2 If your UTXO is insufficient to cover the transaction then the transaction cannot go through.
3 The wallet calculates the transaction fee based on the transaction outputs
4 Through anonymity, utilizing different outputs and addresses to receive the output

#444

  1. UTXO is the unspent output from bitcoin transactions. Each bitcoin transaction begins with coins used to balance the ledger. UTXOs are processed continuously and are responsible for beginning and ending each transaction. Confirmation of transaction results in the removal of spent coins from the UTXO database. But a record of the spent coins still exists on the ledger.

  2. Transaction is not confirmed by miner nodes as input, if the output greater than the input.

  3. Fee = UTXOs - Inputs

  4. Always use new address for transactions
    You can generate as many Bitcoin receiving addresses as you want.
    This is a good practice to ensure anonymity when using Bitcoins on a regular basis. This way, it would be hard to link to 2 or more transactions to you.
    Bitcoin mixing is a process that tries to break the linkability or traceability.
    Bitcoin mixing
    Mixing breaks the link between Bitcoin addresses by either creating temporary addresses or by swapping coins with other addresses of the same value. This makes the trail hard to follow on the blockchain.
    Use a HD wallet
    HD is an abbreviation for Hierarchical Deterministic. All HD wallets use 12-word master seed keys. Each time this seed is appended by a counter at the end and is used to derive seemingly unlimited new Bitcoin addresses hierarchically and sequentially.
    Since all the address are derived from a single master seed, you only need to worry about backing it up. That’s why it is called Hierarchical Deterministic .

#445

How HD wallets works:

HD wallets generate a hierarchical tree-like structure of keys which start from the seed master key based on BIP 32. When you restore an HD wallet using the seed key, the wallet goes ahead and drives all the private keys of the tree using BIP 32.

As long as the scanning of keys is completed on the network; You are done, and your funds are recovered!

While using an HD wallet, the backing up of the seed key is mandatory and should be kept safe so that you can restore your wallet in case your device is lost or damaged.

And this is the beauty of HD wallets. Taking a backup only once means that all subsequent addresses can easily be re-created mathematically from the algorithm. HD wallets use a one-way SHA-256 hash algorithm which produces this tree of keys without any error if the input (or seed key) is the same.

2 Likes
#446

Unspent Transaction Outputs (UTXO) are bitcoin balances in addresses that you control and have received funds on, but not yet spent.

If you don’t have any single UTXO that is large enough to cover your transaction, your wallet will combine UTXOs until the total is at least big enough to pay the bill, plus fee. Total may be more, then you will get change back.

A bitcoin wallet will specify the transaction fee when creating a transaction but checking the blockchain for recent fees, to guess at an amount that will get you in the blockchain reasonably fast.

The notion of transaction inputs and outputs increases privacy in your transaction due to the fact that no one on the outside can tell which of the outputs is to you as change and which is to the payee.

1 Like
#447
  1. They are transactions that have been sent to you and are added together by the wallet giving you your available balance.
  2. UTXO’s will be combined to pay the transaction and that remainder will be paid back to you.
  3. It looks at previous fee structures and figures out the fee to best get your transaction into that blockchain.
  4. Use multiple address
1 Like
#448
  1. A UTXO is the unspent output involving a bitcoin transaction.

2.If the single UTXO is not large enough to comply with the request of the input amount
then the wallet can use a second and third UTXO until the total is greater than or equal to
the amount you are sending.
3.The bitcoin wallet checks on the blockchain the input UTXO and minuses the output
UTXO to determine the fee.
4. By creating new addresses in the UTXO output.

1 Like
#449

1 A UTXO is essentially a transaction that is credited to your wallet address, and is thus available for you to spend.
2 If you do not have enough unspent value for a transaction, the transaction will fail. Your wallet will add up all of your single UTXOs and use them, or parts thereof to complete a transaction.
3 I believe the wallet calculates the total amount to send in order to cover the transaction fee and the amount you are sending to the other entity.
4 use a series of transactions from multiple wallets

1 Like
#450

  1. UTXOs are basically the balance in your wallet which may be several pieces of “change” you have received into your wallet.

  2. The sum of your UTXOs are your wallet’s balance, so if you don’t have enough in your wallet, you can’t spend it. Otherwise, your wallet will collect enough UTXOs to cover the transaction amount and construct a transaction with those UTXOs as inputs to the transaction.

  3. Some wallets let you specify the fee, otherwise it uses one that it thinks is comparable to recent fees. The new UTXOs created by the output of the transaction include the amount you wish to spend, the amount returned to an address controlled by your wallet (your change), and the difference between the two is the fee. The wallet is responsible for creating this difference in the UTXOs that are generated by the wallet in order to cover that fee.

  4. By returning the “change” to a different address that your wallet still controls, it is not apparent by looking at the transaction exactly how much was really spent and how much was returned as change.

1 Like
#451
  • UTXo are basically funds going into an account
  • Won’t be able to proceed with the trasaction
  • The wallet would calculate a fair fee by verifying previous fees charged in past recent transactions
  • By using different addresses in your transaction
#452

1 - UTXOs are essentially unspent bitcoin. If you are sent some bitcoin it will be saved to the blockchain as a UTXO registered to your address.

2 - You would not have enough bitcoin to cover the transaction and it would be rejected.

3 - A bitcoin specifies the fee by making the total output less than the total input, the difference in the two or the leftover bitcoin is used as the fee.

4 - By using multiple addresses it can make it more difficult to calculate which part of any transaction is being paid an which is returning to the sender.

#453
  1. UTXOs are outputs from inputs that have not been spent yet.
  2. The wallet would sum more UTXO until you can cover the transaction and fee.
  3. Total inputs minus total outputs. A wallet may suggest a fee, but I can also edit the amount depending on the wallet I´m using.
  4. I could pay myself into a new address.
1 Like
#454

  1. A UTXO is an output of a previous transaction sent to your address. Your wallet ballance consists of all the UTXO’s that were sent to you.

  2. The wallet will combine all the UTXO’s belonging to your Private Key to complete the transaction.

  3. Your wallet looks at recent transactions on the blockchain and suggests what the fee should be to process your transaction in a reasonably fast time. Some wallets allow you to change the fee manually.

  4. Create multiple outputs to other addresses you own. Since those public addresses are anonymous it’s difficult for someone to track it back to your private key.

#455

Describe what Unspent Transaction Outputs (UTXO) are.

  1. Basically, it’s your change from any Bitcoin or other cryptocurrency transaction.

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

  1. It will add up other UTXOs until you have enough funds , if you don’t have enough void transaction.

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

  1. Input minus output.

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

  1. Generating new output addresses and also by generating multiple output addresses.
1 Like
#456

  1. UTXOs are the transactions that you just received in your wallet and that are ready to be used.

  2. Your wallet would first try to add up the small UTOXs together and the rest would be sent back to yourself. If there are not enough UTXOs the transaction would be canceled.

  3. The transaction fee is never specified because it can be easily calculated. To know the transaction fee you have to do input-output=TX fee

  4. By sending the output to your other bitcoin address instead. People could still guess but, no one could be sure if you send this TX back to yourself or to another person.

1 Like
#457

Unspent transaction outputs are when an amount of btc for instance is inputted to your wallet from two different people and then you wish to spend this to buy other stuff it is transacted out to maybe 2 or 3 others in payment. If must equal the amount sent in and if it is less then the rest can be sent back to an address relating to yourself, minus the mining fee, it is similar to change if you bought something from a shop.

If there was not enough UXTO to cover the transaction then it would not go through and more btc would be needed to be sent to you.

It would specify transaction fee by calculating difference between the output and the input (input = output plus transaction fee)

Increased privacy would be another address to send anything back to yourself.

1 Like
#458
  1. Total balance in your wallet, you are able to utilize.
  2. Transaction will not be accepted by the nodes.
  3. You don’t specify the fee it is easily calculated by the transaction. input = output + fee
  4. One could make several transactions
#460
  1. UTXOs are unspent transaction outputs, essentially your balance
  2. A combination of UTXOs will be used to sort out the necessary amount.
  3. Outputs = Inputs + Transaction fees
  4. Use this notion to process transactions amongst your own wallets
1 Like
#461

  1. Describe what Unspent Transaction Outputs (UTXO) are.
    Received transactions that are not spend yet.

  2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
    If the sum of all your unspent transactions does not cover the output of the transaction, it will not take place.

  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    It will read the historic fees from the blockchain in order to set an amount for the fee. Which will be implicitly specified by the difference between the TX outputs and inputs.

  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    You can generate new addresses in order to send back transactions to you.

1 Like