Homework on Bitcoin Transactions and UTXO - Questions

Blockchain and Bitcoin 101
#1106
  • UTXOs are required to construct a transaction
  • In order to construct a transaction, UTXOs are required in the wallet
  • The wallet will scan the blockchain to see what UTXOs are linked to the wallets private key
  • The private key/wallet can then construct a transaction from the UTXOs linked to the wallets private key
  • The owner of the wallet can construct a transaction for something, which cost 0.7 BTC from two UTXOs linked to their private key of 0.5 BTC and 0.5 BTC
  • The reamining 0.3 BTC that remains can be sent back to the sender minus the transaction fee
  • In this case, we use multiple UTXOs, which are added together. We have to spend all of the inputs to the wallet in each transaction, and the remainder minus the transaction fee is sent back to the sender.
  • So even though no one individual UTXO is large enough to cover the transaction, the aggregated UTXOs can be enough.
  • The transation will be the sum of the outputs plus the transaction fee
  • So for example, I put 0.9 BTC into a transaction. The seller requires 0.7 BTC for an item
  • 0.2 BTC remians, 0.1 BTC can be sent back to the sender and 0.1 BTC is used for the transaction fee
  • The sum of the outputs in this case is 0.8 BTC, with the 0.1 BTC going to the miner for a mining reward
  • The transaction fee varies, and is calculated based on a number of factors
  • An example that I could think of would be to send, would be to send remainder outputs to multiple wallet addresses that I control, rather than just sending the remainder back to the wallet that it was sent from
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#1107
  1. UTXOS are unspent transaction outputs which are used as inputs.
  2. By adding small transactions so they cover the amount.
  3. There would be no transaction.
  4. by having complete control over both input and output.
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#1108
  1. Describe what Unspent Transaction Outputs (UTXO) are

UTXO are unspent transaction data outputs which can be used as data inputs for future transactions.

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

When a single UTXO is insufficient, multiple UTXO are used to cover the transaction. A new UTXO is then subsequently created with the transaction surplus.

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

After creating a transaction, the wallet decides the input and output structure, as well as the transaction fee. It reads the past transaction fees on the network to propose a value deemed favourable for the transaction to be confirmed.

The transaction fee is a small amount of coin to incentivise miners to work the transaction into a block.

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

The transaction inputs and outputs are wallet addresses which do not display the user names. With multiple addresses in a transaction, the level of privacy increases due to transactional complexity.

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#1109
  • Describe what Unspent Transaction Outputs (UTXO) are.

utxo’s are the output values from a transaction.

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

The wallet will send a sufficient amount of utxo to cover the transaction +fee and the rest is sent back to the purchasers wallet. (The wallet does this automatically, right? For example the wallet user just enters the desired amount for the transaction and then the wallet works out the rest ?)

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

It does it automatically by reading it from the blockchain. But there are times when you can choose what fee you want to pay, correct? So you can decided if you want to pay a higher fee and have the transaction completed faster or pay less and the transaction takes longer to be confirmed on the ledger. Correct? :woman_shrugging:)

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

Always generate a new address for incoming payments.

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#1110
  1. UTXO is the total balance in your wallet that can be spent.
  2. The transaction would not be signed.
  3. input minus output.
  4. The transictions do not contain any personal information, only the owner of the private key knows to who those transactions are going.
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#1111

  1. Transactions that can be spended but have not yet been spent.

  2. You will have to use multiple UTXOs and send the remaining output you don’t want to spend back to your self.

  3. Transaction input minus transaction output equals fee

  4. Bitcoin addresses does not provide information about who is holding any specific adress. By using a new bitcoin adress every time receiving privacy is increased

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#1112
.center{text-align: center}
quoting @Fabrice reply

@Fabrice,

ha! Yes just gather some more utxos! Seems obvious reading it but my answer

It will not be validated

leaves one thinking "oh I need one utxo to rule them all!"

thanks for clearing that up

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#1113

Haha, you’re amazing! Keep going man :metal:

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#1114
  1. Unspent transaction is the balance of crypto that your private key owns and is entitled to spend.
  2. The transaction will not be confirmed by the network
  3. Fee = Input - Output, based on the recent miner fees from scanning the network
  4. You could send transactions between yourself from a wallet you own the private keys to, to multiple wallets that you hold the private keys to.
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#1115
  1. UTXOs are transactions or a transaction received into your wallet that have not been spent.
  2. If you have another input, you can sum up all UTXOs to cover the transaction or you will not be able to make that transaction.
  3. The remaining balance from the total Inputs and Outputs equals Fee.
  4. Sending outputs to multiple addresses.
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#1116

  1. An UTXO is a maximum output that a wallet can send out. It has to be an amount that the wallet already received, broadcasted and verified in the blockchain.

  2. The output transaction can consist of a combination of UTXOs (e.g. multiple inputs leading to a single output).

  3. Not sure how it is mathematically done but perhaps the wallet will analyse the historical fees on the blockchain and come up with a fair average or a value that might put the transaction in a slightly more advantageous position in the queue. Pure guessing hahaha!

  4. Transaction patterns can be more easily spotted if the same user always uses the same inputs and outputs for transactions. Perhaps constantly using random multiple inputs and outputs would make such tracking more troublesome and costly, thus increasing the potential level of privacy.

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#1117
  1. Describe what Unspent Transaction Outputs (UTXO) are.
    BTC that is remaining in the balance that has not yet been spent.
  2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
    The transaction could be broken up into multiple UTXOs to cover the amount. It will fail if all of the UTXOs are not enough to cover the TX.
  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    Input minus output.
  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    By sending out multiple outputs to different addresses and to yourself.
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#1118
  1. Wen you send a transaction, your wallet will generate an output based on your unspent inputs, this in called, UTXO (Unspent Transaction Outputs).
  2. Will give you a blue screen error :slight_smile:. If the sum of your all UTXO will cover the amount of the transaction will be generate another UTXO, transaction will be broadcasted, if the sum is not enough your OTXO will not be spend, transaction will not be broadcasted.
  3. Wallet will add on the amount of your transaction a fee based on latest fee on the network.
  4. Sending multiple transaction to the addresses that you control.
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#1119
  1. UTXOs are the output from a previous transaction in a wallet.
  2. The private key in the wallet asks the blockchain how many UTXOs wallet can spend. If not enough UTXO transaction is declined.
  3. Input - output = fee
  4. Public keys on blockchain assist with privacy of transactions. But to increase privacy, you can send to different addresses making it harder for others to track.
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#1120

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

UTXO’s are stored / tracked on the blockchain based on unspent inputs / transactions your wallet receives, the private key in your wallet queries the BC to see what UTXOs you can spend, your wallet figures out your balance

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?

Inputs = Outputs + fee / the wallet would look at previous transaction fees on the BC to configure the applicable fee, implied by the current hash rate

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

You can send outputs any # of addresses obscuring, including back to the original input, obscuring where transactions are going

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#1121
  1. Describe what Unspent Transaction Outputs (UTXO) are.
  • If you have received a transaction of 0.5 BTC and want to spend 0.2 BTC, your new transaction would send 0.2 to the recipient and 0.3 back to you (your new UTXO). Like, when you have a 5$ bill and buy something that costs 2$, you give the whole bill and get the change back. Basically, UTXOs are like bills in your wallet.
  1. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
  • Your wallet would construct a transaction that compiles several UTXOs. Like, if something costs 7$, you would give two 5$ bills and get 3$ back.
  1. How would a bitcoin wallet specify the transaction fee when creating a transaction?
  • It would choose the best fee for you based on least bit size and the current situation on the network.
    • As you pay for amount of information sent, the more UTXOs you compile, the more it costs.
    • Miners first choose the transactions that pay more. (balance of supply & demand)
  1. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
  • Make a new address that you control and send the change to that, instead of back to the old address. Nobody knows if you spent both values or one was the change, and which was the change. Like, when you ask a friend to split a 10$ bill and walk away with 5$ and 5$, he doesn’t know if you spent one, or which one, or both, or maybe neither.
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#1122
  • Describe what Unspent Transaction Outputs (UTXO) are.

These are outputs of a blockchain transaction that has not been spent.

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

Then the wallet will use the rest of UTXO’s that will eventually sum up to the amount that is greater than is required for the transaction.

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

It would automatically find the most suitable transaction fee that will allow for the transaction to be processed asap.

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

It is a great privacy tool, as you can send money to multiple addresses, including yourself, therefore nobody knows where the ‘‘coin change’’ is.

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#1123
  1. Unspent Transaction Outputs (UTXOs)
    are unspent outputs of a previous transaction.
    It is the balance of the wallet after having done some transactions.

2 The transaction would be rejected because you don’t have enough
funds that can be processed.

3 The fee is calculated from the remainder
of all inputs minus the outputs
of a transaction.

4.Because it is impossible to know who has wich adres.
Addresses aren’t linked to an identity so you cannot link the UTXO’s to
an individual.

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#1124

Fair point. Thanks Fabrice!

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#1125

UTXOs are the inputs that a wallet has received that are not yet sent as outputs in a transaction,

Multiple UTXOs will be combined together to make sure your wallet has adequate fund available to it for the transaction and fees.

Most bitcoin wallets calculate the network fee for you to make sure the transaction is sent at a reasonable speed, while some wallets allow you to customize the fee to your liking. Transaction fees are always input minus output.

Since 3rd party viewers of the transaction have no actual idea of who the addresses belong to, you can send multiple inputs to multiple outputs which could all be your own wallets.

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