Homework on Bitcoin Transactions and UTXO - Questions

Blockchain and Bitcoin 101
#4625

  1. a surplus of transactions sent to you that you did not spend.

  2. the next utxo is used in the transaction, but if the balance of the wallet is less than the transaction it will be declined.

  3. the fee is the remainder of all inputs minus the outputs of the transaction

  4. outputs could be split between multiple new address to add an additional layer of privacy.

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#4626

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.

#4627

1. Describe what Unspent Transaction Outputs (UTXO) are.
UTXOs for a given wallet, in the context of bitcoin, are all bitcoin transactions that have been sent to that wallet i.e. they were transaction outputs of other wallets that went to the given wallet.

2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
Then a transaction with multiple outputs is generated by your wallet such that one output of the transaction goes to the destination to which you are trying to send and another output, which is the remaining amount minus fees, goes back to your wallet.

3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
The btc wallet queries the blockchain to determine the fee for a transaction.

4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
Even though all transactions are made public in the blockchain, privacy in each transaction is maintained because only the bitcoin addresses are shown for each transaction and for any given transaction it is impossible to tell which outputs from a transaction are going to the recipient and which are going back to the senders wallet. This inherent feature of UTXOs ensures that transaction privacy is maintained.

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#4628
  1. Describe what Unspent Transaction Outputs (UTXO) are.

Unspent transaction outputs are the outputs from previous transactions that can be used as inputs in new transactions.

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

The wallent will sum up more UTXos to cover the transaction.

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

A bitcoin wallet does not specify the tansacton fee. The fee is calculated, it is the differece between the total input and the total output.

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

Use multiple addresses to send and receive transactions

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#4629
  1. Describe what Unspent Transaction Outputs (UTXO) are.
  • an UTXO is your total balance and is what can be spent.
  1. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
  • transaction will not go through
  1. How would a bitcoin wallet specify the transaction fee when creating a transaction?
  • the difference between transaction input and output
  1. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
  • you can have an output transaction send to yourself on a new public address.
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#4630
  1. UTXO’s are unspent transactions essentially the balance available to spend from your wallet.
  2. Multiple UTXO’s will be combined to fulfill the transaction
  3. The wallet will look at recent blockchain transactions and calculate an amount based on recent fees.
  4. Use multiple addresses for yourself since there is no way to know the owner of each address.
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#4631
  1. Describe what Unspent Transaction Outputs (UTXO) are.

The UTXO is that component of the input transaction that remains unspent after subtracting the output (transaction value + the fee) from this transaction. The sum of all UTXO(s) represents how much you have to spend.

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

As many UTXOs as required will combine as transaction inputs to ensure transaction outputs + fees are met, so that the sum of transaction inputs ALWAYS = the sum of outputs + fees.

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

Not specifically shown to you; but, it would create the transaction and use the optimum fee value and meet the rule as per pt 2. The unspent component sent back to your address (really a UTXO in the blockchain).

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

As it is impossible from the outside, using a blockchain explorer, to see the owner of an output address, your privacy is assured. Hence, by sending to an unknown address you effectively become the anonymous owner.

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#4632

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 go through. :slight_smile:

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#4633
  1. Describe what Unspent Transaction Outputs (UTXO) are.
    -A UTXO is the amount of digital currency remaining after a cryptocurrency transaction is executed.
  2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction? - Your transaction would be declined
  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    -The bitcoin wallet specifies the transaction fee when creating a transaction by substracting the input from the output.
  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction? You can send to multiple addresses as well as yourself, this would be harder to trace.
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#4634

  1. Unspent Transaction Outputs is the amount of digital currency that is left remaining after executing a crpytocurrency transaction.

  2. The transaction would be cancelled.

  3. The wallet determines the transaction fee by taking inputs from the outputs + the transaction fee

  4. Having multiple inputs and multiple outputs in a transaction

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#4635

1. What is the mempool?
It is a data structure managed by each bitcoin wallet application (running on a node) that contains the most recent transactions that have occurred and that are currently propagating through the btc network.

2. What happens if the miners can’t keep up with the rate of the new transaction?
The mempool data structure will fill up faster with new transactions since the rate of transactions being taken up from the mempool (by miners to be confirmed and added to the blockchain) is less than the rate at which transactions are being added.

3. How does a growing mempool effect transaction fees?
A growing mempool means that transaction fees will go up. The reason is that with so many transactions to choose from to confirm, the miners will typically choose those transactions having the largest fees (for adding to the blockchain).

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#4636

  1. UTXO is reserved inputs to your wallet from another wallets output.

  2. It would sum UTXOs available to your private key and create an amount that will cover the transaction plus fee and then send what’s left back to your wallet.

  3. The fee is the amount that remains when the input is subtracted from the output.

  4. Use different addresses for inputs and outputs.

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#4637
  1. Describe what Unspent Transaction Outputs (UTXO) are.
    In practical terms these cumulatively are the wallet or account balances. They function as list of numbers that represent individual sums sent to a wallet and when they are summed they represent the wallet balance.
  2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
    All UTXOs will be added together, if the total is large enough then the transaction will be completed, if not nothing will happen.
  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    It will asses recent transaction fee amounts, calculate an appropriate fee level that will (with greatest probability) result in miners picking up the transaction and then charge that fee to execute the transaction. In some instances the fee amount may be specified by the user instead of the wallet.
  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    Funds can be reallocated to wallets who’s user is not known.
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#4638

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

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#4639

  1. UTXOs or Unspent Transaction Outputs are what the blockchain actually keeps track of. It doesn’t keep track of an overall balance the way a wallet does. Instead, it tracks all of the transaction outputs that have been made to a particular address and those add up to the available amount of inputs that that address can send as outputs to other addresses.

  2. If you don’t have a single UTXO that is large enough to cover your transaction what happens is all UTXOs end up being sent anyway so there would be a combined amount of UTXOs that would cover your transaction and any remaining UTXOs (after fees) would be sent back to yourself.

  3. When creating a transaction a bitcoin wallet would specify the transaction fee by subtracting the total input and the total output of the transaction.

  4. To increase privacy in a transaction several outputs can be used from one input so a person could send BTC to someone and then have three other outputs that send to three other BTC addresses that the sender has.

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#4640

UTXO’s are basically outputs (money sent) from someone or an address that are waiting to be used.

The transaction fee is the difference of the input and the output BUT it is determined by the wallet. When the wallet creates a TX it looks at the blockchain history and determines what an adequate fee will be to get you into the blockchain. Then the wallet calculates what remaining output amount.

It would use more than one UTXO.

You could use new addresses, also create transactions with multiple outputs and inputs.

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#4641

  1. Describe what Unspent Transaction Outputs (UTXO) are.
    UTXOs is basically the total balance on your wallet

  2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
    what would happen then is that the node that or miner that choose my transaction will not be able to validate it

  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    The transaction fee is the difference between inputs and outputs when sending a transaction.
    You can choose the fee manually in an attempt to expedite the transaction speed or save more money by reducing the amount of the fee witch will potentially reduce the speed of the transaction

  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction? by simply using a different address for each transaction or you can increase the number of outputs so it would become more difficult to track transaction

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#4642

Thank you sir for the clarification, much appreciated.

#4643

  1. Its basically the balance of your wallet

  2. You cant do the transaction,

  3. Input-Output=Fee

  4. Using a different address for each receiving transaction.

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#4644

  1. Describe what Unspent Transaction Outputs (UTXO) are.
    An UTXO is created when someone sends me crypto-money. F.e. if someone sends me 0,5 BTC I have 0,5 BTC as an UTXO. This UTXO is saved on the Blockchain. When I warn to send somebody now 0,2 BTC, the private key from my wallet can check if I have enough BTC in my UTXO’s in order to be able to send this 0,2 BTC.

  2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
    It would take all my UTXOs needed to at least have the same amount as my planned transactions and the process the transaction. If the amount of my sent UTXOs is larger then trhe planned transaction, I will get the difference back in my wallet (minus fees of course).

  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    The input of my transaction will be higher than the output that the other wallet receives. So therefore the difference between input and output is the fee (input - output = fee).

  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    Even all the transactions are public, they only show adresses (public keys). One cant tell, which real-world persons are sending or receiving funds.

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