Homework on Bitcoin Transactions and UTXO - Questions

Blockchain and Bitcoin 101
#823

@Mauro Man, thank you! I love the quality we have here! Being in the Academy has been one of the best decisions ever!!! I’m recommending the Academy to my son who lives in Japan :jp: too. I love the kind of values and vision you can experiment here <3 LOVE FROM COSTA RICA :costa_rica:

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#824
  1. UTXOs are the transactions that you received from someone but do not have any further transactions. The amount of bitcoins one receives is unspent.
  2. Your bitcoin wallet will sum multiple UTXOs to match to the large enough output. If you don’t have enough UTXOs, then the transaction will be declined.
  3. Wallet specifies a transaction fee taking into account your previous transaction fees so that your transaction is added to the blockchain.
  4. Since no identity is linked to the bitcoin addresses, one can use a different self-owned wallet address to keep the privacy when transferring the remainder amount.
#825

  1. Since the BTC transaction is a math function t has inputs and outputs. UTXOs are essentially the unspent BTC that have been sent to your address after a transaction. Your wallet keeps track of all your UTXOs for your address since there are no actual coins trading hands. You are really just exchanging a fixed number of UTXOs in a way. To put it simply, a UTXO is the unspent BTC (data) that you have received that you are currently holding in your wallet. When the address you sent BTC to sends it to another address, it becomes a Spent Transaction Output.

  2. The construction of the transaction through your wallet would group another UTXO tied to your address (the input of said transaction) to cover the balance. If your combined UTXOs were more than the amount you were trying to send, the transaction would send you back change as another UTXO during the transaction. This occurs because the inputs must always equal the outputs plus the transaction fee.

  3. Depends on the wallet. Most wallets will automatically select a fee for you based on previous transactions in the blockchain that are similar in size so the transaction won’t be too long. However, with some wallets you can direct it to construct a transaction based on a set fee amount, but it will affect speed. The miners will go after solving transaction blocks with higher transaction fees considering their reward will also be higher, so the higher the fee, the quicker the transaction will be added to the blockchain. In a verified transaction, the Output minus the Input will equal the fee.

  4. Because there is no way to tell through the outputs of a transaction on the public blockchain which address each output went to. If there were 2 outputs, one could be the sender and one the receiver. SHA-256 also allows this to happen through encryption of the transaction data.

#826

@Fabrice thanks for the clarification!

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#827

1. Describe what Unspent Transaction Outputs (UTXO) are. A UTXO defines an output of a blockchain transaction that has not been spent. It is used as an input in a new transaction.

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

3. How would a bitcoin wallet specify the transaction fee when creating a transaction? Bitcoin users set their own transaction fees manually with each outgoing transaction. Users do have the option of setting very low fees for their transactions, but by doing so they would run the risk of their transaction not being processed.

4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction? You can increase privacy in your transactions by sending the remaining UTXOs to a new wallet address so there is no association between the address of origin and the output addresses.

#828

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

UTXOs are output transactions that have not been assigned as an input transaction

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

UTXOs will be combined to make up the sum in order to cover the desired transaction. If the sum is still not enough, the transaction will be rejected.

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

Wallets select a fee that is fast enough in order for the transaction to be selected for mining. It selects the fee based on the blockchain’s historical settings.

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

It is difficult to determine who is the owner of an output transaction, as it is not directly tied to an owner. A transaction with several outputs adds more abstraction.

#829

Thanks Fabrice, I appreciate this.

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#830

i kinda misunderstood the question, not gonna lie.

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#831

It is not really necessary to update the answer. Homework is just to summarize what you have learned. It forces you to think a little deeper. It is not graded.

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#832

Thank you for the added clarification.

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#833
  1. Describe what Unspent Transaction Outputs (UTXO) are.

UTXO stands for 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.

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

If a single UTXO isn’t large enough to satisfy the demand of the input amount, then the wallet will use a second, a third, etc until the total is greater than or equal to the amount your sending.

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

It will compare outputs with inputs and the difference will be the transaction fee.

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

From the outside looking in, it is impossible to tell what outputs correspond to what inputs. For example, you don’t know what UTXOs are sending a partial amount to a recipient, with some refunded to the sender, or what.

#834
  1. A UTXO is the most recent transaction of bitcoin that is written in the blockchain in your wallet. It is similar to holding funds in a bank.
  2. If you don’t have any single UTXO that is large enough to cover your transaction, then your UTXo’s can be split up and redirect outgoing transaction so the remainders is sent to your wallet and returned to you.
  3. The fee is equal to the difference between the inputs and the outputs.
  4. Make use of different addresses when you want to receive inputs.
#835

  1. These are the amounts on the blockchain that specify how much can be spent after a wallet receives the funds from any transaction.

  2. You will not have sufficient funds to cover your transaction

  3. The wallet queries the blockhain to determine the average previous fees and suggests an amount for the current transaction.

  4. The outputs and inputs are public however the holder of the wallet or public key is not so you can perform as many transactions to different addresses within and external to the sending wallet and no one but you will know the specifics.

#836

All good. That’s why I am here. To help out and clear any misunderstandings anyone may have. :smiley:

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#837

No problem. Always here to help out. Keep up the great work. :slight_smile:

#838

  1. The output from previous transactions that makes up the balance of your wallet.

  2. Your wallet will sum multiple uxtos and use them for the transaction. Otherwise transaction will be rejected

  3. The wallet will look at the blockchain recent fees and propose a fee that will get you into the blockchain in a reasonable time frame.
    Sum of transaction Inputs - Sum of transaction Outputs = fee

  4. By generating new wallet addresses that hold no personal information, no one can tell who owns that address

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#839

  1. UTXOs are bitcoins that you have received but have not yet been spent.

  2. Your wallet would get the funds from multiple UTXOs you own and use those to pay for the transaction.

  3. The wallet does not specify the fee in the transaction. The fee is derived from the amount sent to the recipient and the “change”.

  4. To increase the privacy of transactions, one can group together multiple inputs and outputs into one transaction.

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#840
  1. Unspent Transaction Outputs is the left over balance in your wallet, they kept track of the transactions.
  2. If your UTXO in not large enough for the transaction it will be declined until you add more.
  3. The transaction fee is calculated from the remainder of inputs and outputs, the most costly.
  4. Increase the number of outputs, by using different addresses.
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#841
  1. UTXO’s are unspent outputs from a wallet. If someone sent btc to you using your public key (derived from your private key) then that is a UTXO.
  2. The transaction will be thrown out.
  3. Input - output
  4. Use of new addresses every time and you don’t really know which UTXO is spent and which is unspent (sent back).
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#842

Homework on Bitcoin Transactions and UTXO - Questions

  1. Describe what Unspent Transaction Outputs (UTXO) are.
    the inputs that were sent, ideally to an address in your wallet to your public key. So they all add up to what you have available.

  2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction? it will gather multiple to equal at least the transaction/s and fee.

  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    What ever is left over between what you are sending (including back to an addy you control).

  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    Send the change left over to different addresses and even differnt wallets.
    Or is that what those merano coins are for??

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