Homework on Bitcoin Transactions and UTXO - Questions

Blockchain and Bitcoin 101
#5327
  1. Describe what Unspent Transaction Outputs (UTXO) are.
    UTXO is the amount of input (output from the previous transaction) which is unspent, which represents the amount you have left to spend (i.e. balance).
  2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
    It would sum up all other UTXOs, which may cover for the transaction. If that is yet not enough, the transaction will be rejected.
  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    The wallet would construct the fee amount based on Input (UTXO) - Output (how much you want to spend).
  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    You can send to another address (wallet) that you own.
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#5328
  1. UTXO’s are funds resting in a wallet from previous inputs.
  2. The nodes would reject the transaction because you are claiming to have something that the ledger knows you don’t have.
  3. The wallet specifies the size of fee that would send the transaction through in a reasonable time, you can increase the fee speeding up the transaction or reduce the fee which may take longer for the transaction to take place.
  4. Many inputs or outputs can occur in a transaction. So you could send 1.0 BTC as the output, however only 0.1 BTC is actually going to a vendor whereas 0.9 BTC is returning to your wallet
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#5329
  1. UTXO are the balance left in your wallet that it keeps track of.
  2. the transaction will be denied because there are no available utxos to meet the minimum transaction mount requested
    3.it would be the transaction inputs minus the transaction outputs
    4.always generate new outputs and dont use them a second time
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#5330

I have a question on UTXOs and notation in Explorer.

For each transaction, is my total UTXO used in the transaction then the remainder (after spend amount + fee) sent back?

Scenario:
I own 50 bitcoin (total UTXOs).
I send Sam .8 bitcoin and it will cost .2 in fees for a total of 1.0 bitcoin.

Block Explorer notation:
50 BTC sent (total UTXOs).
1.0 spend (includes fee).
Return 49 BTC.

Thank you in advance.

#5331

Thanks for your insight !

#5332

When you look at your Bitcoin wallet, you see a balance. For this example, let’s set that at 100 bitcoin. Although you observe just one balance, your funds are actually comprised of several UTXOs. You may have four UTXOs worth 25 bitcoin each, two UTXOs worth 50, or a set of UTXOs valuing 37, 18, 40, and 5 bitcoin. The specific amounts don’t matter, but they must add up to your total balance, in this case, 100. Let’s assume that you’re shopping around for a new car, you decide on a Porche that costs 35 bitcoin. Well, your wallet only contains UTXOs equaling 15, 17, 28, and 40 bitcoin each. You don’t have one valued at precisely 35 bitcoin. It’s impossible to split UTXOs, so there’s no way to pay the exact 35 bitcoin that you owe. Instead, you spend the 40 bitcoin UTXO. In its place, the network mints two new UTXOs: one valued at 35 bitcoin, one worth 5 bitcoin. The car dealership receives the 35 bitcoin UTXO while you receive the 5 bitcoin UTXO as change.

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#5333
  1. Describe what Unspent Transaction Outputs (UTXO) are.

UTXO is the balance that your private key has access to. Your private key gets access to UTXO from receiving input transactions. When your private keys receives input transaction, the transaction gets added to the blockchain, now your UTXO also gets added to the blockchain. This is the amount available on your private keys.

  1. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
    Your transaction will fail, it will not get confirmed, it will not get added to the blockchain.

  2. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    When your doing a transaction and you have put in what you want to send, the wallet lets you know what you are paying in fees.
    Fees=input-output

  3. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    Use different addresses when receiving transactions.

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#5334

  1. Describe what Unspent Transaction Outputs (UTXO) are.
    a. When crypto is received and has not been outputted (spent)

  2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
    b. Then your wallet would select multiple UTXOs to cover your transaction AND the fee.

  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    c. It looks at similar transactions and their fees, then selects an amount for the fee that will readily get put into the blockchain.

  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    d. Ensure you use enough currency to get change back so there are multiple recipients and change back to yourself.

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#5335

  1. UTXO is a record of an output received from a previous transaction that is yet to be spent by the recipient. It is the amount left on the ledger that is available to be spent by a wallet for future transactions and transaction fees.

  2. If you do not have a single UTXO that is big enough to cover a transaction, the wallet can sum up multiple UTXOs available to it and then use this to cover the transaction and the transaction fee whilst leaving any excesses as an unspent transaction output. If the sum of UTXOs is not enough to cover the transaction, the transaction is declined.

  3. Some wallets will show different transaction fees and ask you to choose which one you want to use whilst others automatically pick the most favourable one to enable your transaction to be verified soon and this is factored in when calculating to ensure that your UTXO covers the transaction as well as the transaction fees.

  4. transaction inputs and outputs simply show how a UTXO or group of UTXOs were spent across different wallet addresses and fees. It doesn’t directly show how much of that amount goes to other users and how much goes to an address belonging to the original sender and this can in fact increase privacy, in addition to the fact that the transaction occurs between wallets and not necessarily between known individuals.

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#5336
  1. Describe what Unspent Transaction Outputs (UTXO) are.
    All txn outputs a pvk has received which the same pvk has not used as input to any txn
  2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
    You send as many UTXOs that will cover the txn including fees and the remainder you send to a pvk that you control
  3. How would a bitcoin wallet specify the transaction fee when creating a transaction? It will look at previous fees and select lowest BUT fastest
  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    You can send outputs to other pvks that you control
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#5337
  1. UTXOs are the amount of bitcoin your have
    2.If you don’t have any single UTXO it will combine then to create or cover your transaction. If all UTXOs don’t reach the amount needed the transaction will be denied
  2. The bitcoin wallet specifies fees by showing the input subtracted by the output.
    4.From the outside it is impossible to know
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#5338
  1. UTXOs are the amount of bitcoin your have
    2.If you don’t have any single UTXO it will combine then to create or cover your transaction.
    If all UTXOs don’t reach the amount needed the transaction will be denied
  2. The bitcoin wallet specifies fees by showing the input subtracted by the output.
  3. From the outside it is impossible to know which transaction was sent to whom
#5339

You can use multiple UTXOs as inputs to a new tx. If that isn’t enough to cover your transaction then your transaction would be refused.

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#5340

A UTXO is an Unspent Transaction Output. When someone sends bitcoin to you, they sit around unspent as an output of a transaction. When you want to send bitcoin to someone else, the UTXOs in your posession are then used as inputs in the next transaction.

If you didn’t have a single UTXO that was large enough to cover a transaction, it would be combined with other UTXO’s until enough input is provided. The “change” is then sent back to you in a new UTXO.

The fee would be calculated by subtracting the overall output from the overall input.

Generate a new address with each transaction. You could also increase the number of outputs by just having multiple outputs being sent back to yourself.

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#5341

Thank you Maki. Your reply makes it clear. I understand now.

#5342

  1. UTXOs (Unspent Transaction Outputs) correspond to the transactions in which a certain private key was the recipient, and whose balance was not used yet.

  2. The wallet adds the all the UTXOs together. If the collective balance is not large enuough the transaction is denied.

  3. Transaction Fee = Outputs - Inputs. A person can choose to specify the fee manually or accept the suggested fee by the wallet.

  4. The output of bitcoin transactions can have multiple channels, including the same input channel. Since there is no possibility of knowing who each UTXO goes to, no one can can be sure the value of the transaction output to the input. One can also increase the number of outputs so it is more difficult to track transactions. Since addresses are not linked to any identity, it is impossible to link a UTXO to an individual.

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#5343

Thank you, appreciate it!

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#5344

  1. Is the output of a previous transaction that creates the input for your next transaction.

  2. No transaction would occur as input doesn’t match output

  3. It would recommend a fee based on recent transactions that gives your upcoming transaction a high probability of being processed.

  4. Use a different receiving address if sending it back to yourself.

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#5345

You can use multiple UTXOs as inputs to a new tx. If that isn’t enough to cover your transaction then your transaction would be refused.

#5346

Rob here on Bitcoin Transactions and UTXO:

1 Unspent Transaction Outputs are the bitcoins in your wallet that have been received but not yet spent.
2 If you do not have any single UTXO that is large enough to cover your transaction, your wallet will find the sum of all your UTXO’s to pay in full and confirm the transaction.
3 Bitcoin wallet specifies the transaction fee after subtracting the input from the output.
4 Increased privacy in your transaction through the use of input and output notation is achieved by using an offline hardware wallet that only gives a digital signature and does not share your private key.

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