Homework on Bitcoin Transactions and UTXO - Questions

Blockchain and Bitcoin 101
#1005

Hey Lane,
Do you know the game “mr. x” or scotland yard? On a playing field with lots of stations mr. x has to be found by the police. Every 5 moves mr. x has to give up his position on the playing field so the police knows where mr. x actually stands. The following moves are covered again and with every move mr. x goes further away from the point he has been seen last time he had to show himself. As i understand it in relation to bitcoin: The moment mr. x has to show himself is for example a transaction that is related to a exchange. Exchanges hold alot of information about the users. So transactions in relation to exchanges are easily connected with your identity. If you are moving your BTC further “away” from exchanges, your identity will get more hidden… This is how I understand it but maybe it is only my fantasy. :smile: Maybe check other answers as well! Cu!

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#1006

  1. They are took from an input to be spent somewhere else.

  2. The Transaction cant happen. Youre wallet checks with the Blockchain to see what UTXO you have.

  3. The Wallet calculates the diff between the Input and Output amount.

  4. Multiple addresses can come from one input.

#1007
  1. information on the blockchain about the amount of BTC input and output
  2. the wallet could not verify any transaction
  3. the wallet set automatically most efficient from previous transactions or give you the option how much fee you like to spend (fast or slow)
  4. mixer :wink: i dont know
#1008
  1. available $ leftover to spend.
  2. transaction would be declined.
  3. inputs minus outputs.
  4. generate new output addresses.
#1009

  1. Describe what Unspent Transaction Outputs (UTXO) are.
    UTXOs are the outputs from previous transactions that have not been spent yet. Your wallet will query the blockchain to determine which UTXOs can be spent by its private key and calculate the sum of these to give you a balance.

  2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
    Your wallet will keep use enough to UTXOs to cover the transaction, if there is any remaining BTC it will be returned to your wallet. For example, if you have two 0.5 BTC UTXOs and you want to spend 0.6 BTC, your wallet will use both of the 0.5 BTC UTXOs then create an output of 0.6 BTC to the receipient and an output of 0.4 BTC back to your wallet.

  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    The wallet will automatically calculate the transaction fee to be significant enough so a miner will include it in the next block. If you specify the fee is zero the transaction will never be confirmed as the miner has no incentive to add it to the next block. The fee is taken by subtracting the output from the inputs.

  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    You could use multiple wallets to make it harder to determine which of the outputs has been sent to another person and which has been returned as your change for the transactions.

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#1010

  1. UTXO is the sum of all transactions that have been sent to a user. When user starts a new transaction, the UTXO amount will act as input for that transaction

  2. Then it will use a combination of UTXOs, and if they are less than needed to cover for transaction then the transaction will be disgarded

  3. Transaction fee will be part of the output of transaction. It can calculate it based of previous fees or user can set it himself

  4. I would transfer some part of bitcoin back to myself but using a different public address.

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#1011

You can combine multiple smaller utxo’s together to cover the amount. (Use more inputs)
Only if the sum of all your available utxo’s aren’t enough to cover the transaction, it will fail

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#1012

You can combine multiple smaller utxo’s together to cover the amount. (Use more inputs)
Only if the sum of all your available utxo’s aren’t enough to cover the transaction, it will fail

#1013

You can combine multiple smaller utxo’s together to cover the amount. (Use more inputs)
Only if the sum of all your available utxo’s aren’t enough to cover the transaction, it will fail

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#1014

You can use more outputs. If you want to pay 0.5 btc and you have an utxo of 1btc, you can send the change back to yourself on a different address that you own. So other people can’t know wich amount is the payment and wich is the change

#1015

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

UTXO = Inputs to account - outputs from account

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

The wallet will sum up other UTXOs to pay the fees and then send the difference back as “change”

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

The bitcoin wallet looks at transaction fees currently being mined into blocks on the blockchain and suggests a fee to the user (some allow the user to change the fee) that will allow the transaction to be placed in a block in a reasonable timeframe

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

You could use multiple bitcoin wallets and send to one of more of them when transacting so that it is difficult to determine which address is the transaction

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#1016

You can combine multiple smaller utxo’s together to cover the amount. (Use more inputs)
Only if the sum of all your available utxo’s aren’t enough to cover the transaction, it will fail

#1017

You can combine multiple smaller utxo’s together to cover the amount. (Use more inputs)
Only if the sum of all your available utxo’s aren’t enough to cover the transaction, it will fail

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#1018

In Bitcoin, most wallets use HD wallets, wich Means that you can derive more keys with 1 master seed. (derived from 12 words or more [bip39] ) so each time you need to receive a payment, your Wallet will generate a new bitcoin address. In Bitcoin transactions, you can specify inputs and outputs. So you can use for example 1 utxo of 1 btc and pay smaller amounts to multiple addresses in the output. People can’t know wich addresses belongs to you. Only your private keys in your Wallet can know wich addresses belong to you.

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#1019

You can combine multiple smaller utxo’s together to cover the amount. (Use more inputs)
Only if the sum of all your available utxo’s aren’t enough to cover the transaction, it will fail

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#1021

Thanks, I understand more clearly now. Even with ‘dust’ balances, an output could be created from summing these together.

#1022

thanks for the correction!

#1023

  1. A UTXO contains coins that I can spend (if I have the right private key!)

  2. Multiple UTXOs can be used in combination in a transaction.

  3. Sum of inputs minus sum of outputs.

  4. Could make many small amount UTXOs to make tracing more tedious.

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#1024

what would be an example of this?

Thanks fo rthe reply. really appreciate it.

Rob.

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#1025

Thanks for the clarification Fabrice. Noted. :+1:

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