Homework on Bitcoin Transactions and UTXO - Questions

Blockchain and Bitcoin 101
#1551

What if I have 3 UTXOs of 1 BTC each and I wish to send 1.5 BTC to a friend?

And how is the fee related to inputs and outputs?

How about the outputs of the transaction? How can you increase your privacy here?

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#1552

Answers:

  1. UXTO are basically money I receive to my wallet as an input, which is the output of the sender. It is use by the wallet to construct how much I can spend on a or multiple outputs.

  2. Then a transaction will not be able to take place.

  3. A bitcoin wallet will not specify explicitly on a transaction fee, however, it will take the total input minus the total outputs and the remaining will be known as the transaction fee.

  4. Transaction inputs and outputs are a transaction code which does not specify exactly who is the sender or who is the receiver. And you can’t tell from the codes from where the money is sending to whether to that person own account or anywhere else.

#1553

There is a chance that your address may have multiple UTXO’s. In that case your wallet will combine them in order to make the transactions happen. As long as the sum is equal or larger than the required amount. If not, your transaction will be invalid. :slight_smile:

A bitcoin wallet must set a fee. It does this by setting a unit of measurement called “satoshi per byte”. If we set it for example at 10 and the size of the transaction is 100bytes, we would pay 1000 satoshi in fees. Let’s say we had to send 5000 satoshi with the help of an input of 10000 satoshi. We would pay 5000 satoshi and get back 4000 satoshi bhack. (Fees were 1000 satoshi)

Total input - total output = fees. ==> 10000 - 9000 = 1000.

I don’t think this is mentioned in the course, but it is quite important. :smiley:

What if I connect your identity to one of your public addresses you own. Is there anything you can do to increase your privacy again?

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#1554

  1. UTXOs are unspent outputs of the previous transaction.

  2. The transaction would be declined if your UTXO is not large enough to cover it.

  3. It will be deducted from the utxo’s used for the transaction.

  4. Anonymity is provided by the nature of bitcoin transactions as output can be sent to multiple channels as well to same input channel. No one knows except the private key owner.

#1555

Yes, we are on the BitCoin blockchain. I will remember that going forward. I discover that there are a lot of “things” to keep in mind about how the block chain works.

I’m still very new to this. Thank you for everyone’s input. This is good stuff.

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#1556

You can have multiple UTXOs hovever if the sum of all your UTXOs is not large enough then it will fail :slight_smile:

The fee is the remainder of the funds not sent to the specified output. For example if you have an UTXO woth 5 BTC and want to send someone 1 BTC, you have to send 4 BTC back. If you don’t specify that, the remainder will be send to the miner as a fee.

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#1557
  1. UTXO’s are essentially credits that can be spent
  2. If you dont have a big enough single UTXO to cover a transaction, then your wallet must group multiple UTXO’s into the transaction and return the difference back to your wallet as an output
  3. A wallet specifies transaction fee by constructing a transaction with less outputs than inputs, which implies that the fee is the difference
    4)You could use the notion of inputs and outputs to increase your privacy by keeping your wallet balance from being tracked by completing transactions that returns your coins by using multiple public addresses that contribute back to your wallet
1 Like
#1558
  1. sum of all inputs received by the wallet (credit)
  2. no UTXO, no funds to spent, no output / transaction possible
  3. output / payment to other recipient, minus pay-back to own wallet, difference input/output
    4.? don´ fully understand the question. Maybe be sending back to yourself? - sorry, not clear
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#1559

  1. Unspent Transaction Outputs (UTXOs) are the positive balance of your bitcoin that can be spend.

  2. Your transaction will be refused by the receiver’s wallet ( Which at the same time is a node which work is to verify on the blockchain the balance of the sender ).

  3. The Wallet’s job is to verify the transactions fees on the blockchain and it will propose the fastest one ( more expensive ) or it will give the possibility to choose which fee rate to the user of that specific wallet.

  4. the wallet generates a different public address everytime it does a transaction whether is an input or an output

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#1560

Correct. However the wallet will set the fee using a unit of measurement called “satoshi per byte”. The total fee is calculated as you said. Total input - Total output ? Fee

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#1561

The question did not imply that you don’t have any UTXO. It implied that you have multiple, but none of them are large enough. Let’s say that you have 2 UTXO’s. Both are 0.5btc and you need to make a transaction for 0.75btc. Is there anything you could to to make the transaction happen?

Let’s assume I connected your identity to one of the addresses you own. It has 1 bitcoin. Is there anything you can do in order to make me confused? Remember that the bitcoin blockchain is transparent. This is a bit of a tricky question. :smiley:

1 Like
#1562

There is always a possibility you could combine multiple UTXO’s if the total sum of them will be larger than the transaction needs. :slight_smile:

2 Likes
#1563

Homework on Bitcoin Transactions and UTXO - Questions

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

A transaction consists of any number of inputs and outputs (at least one of each). The outputs are called UTXOs (Unspent Transaction Outputs). Inputs are in reality UTXOs from earlier transactions.

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

A wallet can basically ask the blockchain : “which UTXOs can this private key spend?” The blockchain will provide the data necessary to create an overview of all the UTXOs that are available for the key, and the wallet can then also know the total “balance” of the key.

If none of the single UTXOs available have enough to cover the total value of outputs, the wallet can combine multiple UTXOs together as inputs in the transaction. The wallet may also have to create a separate output for the “change”, if the total value of the inputs becomes bigger than the necessary value to balance the outputs.

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

A bitcoin transaction always has to have a balance between the total value of inputs and the total value of outputs (plus fees).

  • value of (all Inputs) = value of (all Outputs + fees)

The fee of a transaction is specified by the wallet (user). Most wallets are able to estimate the necessary size of fees, based on the current state of the network.

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

Because one is able to choose which UTXOs to spend as inputs in a transaction, one can more easily contribute to the privacy factor.

In the same way, privacy can be achieved by being able to organizing the outputs of a transaction. The UTXOs themselves does not include any information about the owner of them.

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#1564
  1. The sum of your UTXOs is the amount you have to spend.
  2. You cant spend money you dont have.
  3. A bitcoin wallet never specifies the fee because it is easily calculated - input minus output = fee.
  4. Always generates new adresses on the outputs so uts hard to know which output goes back to the seller.
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#1565

  1. Describe UTXO:
    The result of Bicoins if you calculate Inputs minus Output to destinated transaction address minus Fee. Unspent outputs may be used in further transactions. It is necessary to prevent double spending and fraud.

  2. You don’t have any single UTXO that is large enough to cover for your transaction?
    Your wallet will combine UTXOs in order to cover the transaction. If not possibel, teh transaction would be declined.

  3. Specify the transaction fee:
    Fee = Input – Output - UTXO

  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    You can create multiple outputs, so it becomes difficult to see from outside which output is yours.

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#1566

Not really, modern wallets do specify the fee based on the network usage. But they do this in the background and don’t need to bother with it. They do specify it in this particular fashion (inputs - outputs).
When this needs to concern you is when you would like to construct a raw transaction by yourself. Not using a modern wallet that does this for you. In the past many people forgot to do this and send a large portion of their balance to the miner. :slight_smile:

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#1567

Hi @Maceo :slight_smile: I think you mistake the notion of UTXOs (Unspent Transaction Outputs). The sum of your balance is represented by the sum of values in UTXOs.
Once you create a new transaction the UTXOs become the Input of said transaction. The output of this transaction is a new unspent Output (or UTXO).

Therefore if you want to calculate the fee it is the value of tx Inputs - Output.

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#1568

UTXOs are the Unspent Transaction Outputs that the wallet gets from the blockchain and uses to create the input for a new transaction.

All UTXOs are used as input for the new transaction. The balance remaining from the transaction becomes a new UTXO sent to the creator and held on the blockchain. If there is only one single UTXO available to be spent, and that single balance is not enough, your wallet will deny the transaction.

#1569

A bitcoin wallet would specify a transaction fee by calculating the fees from other transactions and the speed of the transaction. It then identifies a fee that will create a timely transaction.

You could use the notion of transaction inputs and outputs to increase privacy in your transaction by using multiple inputs and outputs, by controlling addresses on multiple exchanges and by having multiple cold storage wallets.

#1570

1 unspent transactions (UXTO) you send out want something for .4 bitcoin and you have 1 bitcoin you send it and get .6 bitcoins back as change
2 you would have to wait till you had enough to buy it
3 subtract the difference between your change and what cost was
4 by sending bitcoin back to yourself with payment to others the part going back to you would be in an address that only you know is yours