Homework on Bitcoin Transactions and UTXO - Questions

Blockchain and Bitcoin 101
#5347

In the video it mentions that if you want to send less btc that what you have as UTXO ,some part of the transaction has to be sent back to you after paying the miners fee.Like if your UTXO is 2 btc but you only want to send 1 btc. Was the tx process more manual in the past ? Now if I send a transaction it all seem to happen automatcally ,I don’t have to send any btc back to myself,it just happens or am I missing something?

#5348

After every transaction you make or when funds are moved, most bitcoin wallets automatically generate a new address. There are three main types of wallets that have this feature.

  1. A non-deterministic (random) wallet, all the private/public keypairs are generated randomly. The wallet may generate 100 random private keys as soon as it is initialized.
  2. A sequential deterministic wallet, a passphrase or sequence of characters is randomly generated to act as a seed. It is then repeatedly incremented and hashed to generate new private keys.
  3. A hierarchical deterministic wallet, a single keypair is created initially and is known as the master keypair. This master keypair is used to generate child keypairs (remarkably, new bitcoin addresses can be generated using just the public key).
#5349

Thanks a lot for the reply.

#5350

  1. Describe what Unspent Transaction Outputs (UTXO) are.
    A BTC transaction is comprised of inputs and outputs, only UTXOs, can be used to be spent as an input in another transaction whereas spent outputs are already spent hence can’t be spent again. We always need a UTXO or an unspent transaction output to make a transaction.

  2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
    If i don’t have a single UTXO large enough, it simply means you don’t have BTC to spend, so transaction will not go through.

  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    The fee is calculated by inputs minus the outputs of transactions.

  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    İ can use multiple wallets and send UTXO to other wallets of my own, this would create privacy to the amount i own and transactions i am involved.

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#5351

  1. UTXO is the balance of unspent transactions available to spend as calculated by your wallet.

  2. As long as the sum of all your available UTXOs are sufficient to cover the transaction the transaction will go through.

  3. Most wallets calculate the fee to be an amount sufficient to get the transaction done in a reasonable time. Other wallets allow you to set the fee.

  4. You can obfuscate transactions by sending a portion of the transaction to yourself via another wallet that you control

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#5352 
1. UTXO are the balance left in your wallet that it keeps track of.
2. The transaction would be declined if your UTXO is not large enough to cover it.
3. The wallet checks the blockchain and figures out the correct fee.
4. Several addresses and outputs can result from one input.
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#5353
  1. Describe what Unspent Transaction Outputs (UTXO) are.`

It is the amount of digital currency left after executing cryptocurrency transaction.

  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 rejected if there are not enough other UTXO to cover.

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

Most wallets/platforms have a fixed transaction fee to help ensure that the transaction goes through (Also simplifies the process).
For some wallets, you can specify the transaction fee.

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

By using any single address less often for transaction

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#5354

1.They are your bitcoin wallet’s balance.They are the unspent transaction output from the previous spent input.
2.The transaction would not go through/would be invalid unless you have other UTXO’s that adds up to the amount that you want to send.
3.It would be the previous spent input minus the UTXO
4.You could open multiple wallets/addresses and send it to them(multiple addresses)/have multiple inputs/outputs.

1 Like
#5355

  1. UTXO are transactions with funds being accessible to a particular wallet that has yet to send such funds to another wallet. Basically, funds that yet to be spent and still accessible to the the person who holds the keys to that particular wallet where the UTXO resides.

  2. Other UTXO would be utilized to cover for the total amount of the transaction and any remaining amount after deducting the transaction fee would be sent back to the original wallet as change.

  3. Certain wallets allow the user to configure the transaction fee while other wallets have a default configuration that uses the same amount for a stable/speedy transaction.

  4. I can use another wallet that I own to further increase my privacy as more addresses involved would obscure the owner’s identity of the involving addresses.

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#5356

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.

#5357

1. Describe what Unspent Transaction Outputs (UTXO) are: UTXOs are the outputs of transactions we have received (our actual funds), which we’ll use as inputs in the future transactions we build.

2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction? You would need to use more UTXOs until the sum of all the UTXOs you input in the transaction is large enough to cover for the transaction.

3. How would a bitcoin wallet specify the transaction fee when creating a transaction? Wallets do not specify them, they just calculate the difference between sum of the UTXOs used as inputs and the sum of the UTXOs used as outputs of the transaction and that number is considered to be the transaction fee.

4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction? Since no one necessarily knows which address belongs to who, you could create a transaction in which one or more output UTXOs are sent to another address you have (you can send UTXOs between several addresses you control).

#5358

Thanks for the reply , I see I missed that point of the question and yes of course it makes sense.Just thought cuz everything is automatic and you can see your whole balance that you just meant there was not enough btc/big enough UTXO to send.

#5359
  1. Outputs from other transactions you received and didn’t spend in another transaction
  2. It would get rejected from the network
  3. The wallet looks at the latest transaction fees
  4. You can send money to an address you control and it’s not readable to which person you have sent it
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#5360

Yeah, that’s how a wallet works, if a single UTXO is not large enough to cover your transaction, it uses multiple UTXOs to cover your transaction.

#5361

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.

1 Like
#5362

Thanks for the feedback.Was it more manual in the past to add UTXO’s to get to the required amount for a transaction? If yes how did it work and how long ago did it change?

#5363

Homework on Bitcoin Transactions and UTXO - Questions

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

UTXOs can be thought of as the amount of Bitcoin available to spend at any given time as an input 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 the UTXO is not large enough to cover the transaction, then it will be denied.

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

The fees are calculated by the difference between the inputs and outputs of a transaction.

TX Input - TX Output = Fee

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

Increasing transaction privacy can be achieved by having multiple wallets. When sending funds, it can be done from different wallets into one and in reverse when receiving.

1 Like
#5364

There are some wallets for instance Electrum Bitcoin wallet gives you control over your coins like spending specific unspent outputs (UTXOs) and controlling where change goes.

#5365

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.

#5366

You can just use multiple addresses in the same wallet then send your new funds to those different addresses.