Homework on Bitcoin Transactions and UTXO - Questions

Blockchain and Bitcoin 101
#1632

Homework on Bitcoin Transactions and UTXO - Questions

  1. Describe what Unspent Transaction Outputs (UTXO) are.
  2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?

1.Unspent total UTXOs would be the amount of funds the wallet is holding.
2.It would use 2 UTXOs or more depending on what is needed. If there were not enough funds however transaction would not work.
3.By taking the difference between the input and output UTXO.
4.Use different addresses when receiving UXTOs.

1 Like
#1633

Either the user sets the transaction fee or the wallet does it automatically for you. The wallet will take a look at the current transactions and set the fee accordingly. It does this by using a unit of measurement called “satoshi per byte”. Changing the value of that unit will change the total fee of the transaction. :slight_smile:

2 Likes
#1634

What if I connect your identity to one of the addresses you own. I could track you without a problem, since everything is public. Is there anything you could do to increase your privacy again?

Correct. Maybe this is the key that will help you solve the question I answered above. :slight_smile:

2 Likes
#1635

That is how we calculate the total fee of the transaction. Total fee is depended on what the wallet sets. The wallet uses a unit of measurement called “satoshi per byte”. :slight_smile:

4 Likes
#1636

You could combine muliple UTXOs to make the transaction happen. If the sum of all UTXO’s is not large enough, the transaction would be invalid.

There is no correct fee. Any fee is valid. The higher the fee, the more likely it is that your transaction will get accepeted. :smiley:

2 Likes
#1637

Aahh thats right! Thank you!! :slight_smile:

1 Like
#1638

  1. It’s an incoming transaction that hasn’t been spent yet.

  2. The transaction wouldn’t be possible.

  3. The fee would be the input minus the output.

  4. Have multiple output adresses.

1 Like
#1639
  1. Describe what Unspent Transaction Outputs (UTXO) are.

They are unspent outputs from previous transactions that your private key can sign and spend. Your wallet adds up all of the UTXOs that your private key can access and this becomes the current “balance” of 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 will combine enough of your UTXOs to equal or exceed the amount of the current transaction plus the fee. The remainder will be sent back to you as another UTXO you can spend later.

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

The fee is the difference between the inputs and outputs of the transaction.

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

Using different addresses for each transaction rather than having all transactions sent to the same address will increase your privacy. If any transaction is ever identified to belong to a particular person then ALL transactions to that address must also belong to the same person. Coinbase, for example, knows who I am. They also know my whitelisted withdrawal addresses are probably going to another wallet I control. Therefore they could deduce that any other transactions outside of Coinbase that are sent to those same addresses also belong to me. I can break this trail by using different addresses.

#1640

There is always a possibility you could combine multiple UTXOs. If the sum of all UTXOs is larger than the required amount, then the transaction will occur. Otherwise it would be an invalid transaction.

2 Likes
#1641
  • Describe what Unspent Transaction Outputs (UTXO) are.
    UTXO the unspent amount of BTC available in a wallet.
  • What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
    All UTXOs accumulate until needed. If the total is large enough to cover a transaction, then the transaction can be processed.
  • How would a bitcoin wallet specify the transaction fee when creating a transaction?
    The transaction fee is automatically calculated and added to the Output by the wallet.
  • How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    The use of multiple different input and output addresses can increase the level of privacy for your transactions.
#1642

Correct. This is how we calculate the total fee in a transaction. A wallet still has to set a proper fee. It does this by looking at the current transactions in the mempool. Once it finds the best approach, it sets a fee using a unit of measurement called “satoshi per byte”. :smiley:

2 Likes
#1643
  1. Describe what Unspent Transaction Outputs (UTXO) are.

In bitcoin you don’t really have a balance. You have utxos (unspent transaction outputs). This comes into place when you construct a new transaction. If your mom, dad, sister and your dog sends you 0.25 btc each, you will have 4x0.25 utxos as your balance. So you now have the sum of 1 bitcoin. Say you now want to send 0.4 bitcoin to your cousin. Now you will create a transaction of utxos available (2x0.25), which is 0.5 bitcoin. The inputs and outputs needs to be the same. So the output will be 0.4 to your cousin and 0.1 back to you. You will now have three utxos (0.25, 0.25 and 0.1 (the one you just sent back to yourself)) which will be a total amount of 0.6 bitcoin.

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

You add utxos together, so it is at least large enough for the transaction, and if there are exceeded bitcoin you send them back to yourself.

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

The transaction fee is specified at an amount so a miner would register the transaction. They register the highest fee they can find. The fee isn’t specified in the transaction, but it is always the amount of the input minus output. (input = output + fees) (input - output = fees)

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

People observing transactions will not know what sort of outputs are back to you or the one you are sending bitcoin too. People wouldn’t know what goes to goods or services you are paying for, or if it is back to yourself. If you have several addresses in the same wallet, you can send them back and forth in the same wallet, and your bitcoin will only be known to you.

1 Like
#1644

1.) A private key positive BTC balance exist out of UTXO. its the BTC one received that is spendable.

2.) You cannot spend BTC

3.) The diffrence between inputs and outputs.

4.) For every transaction u use a new address.

1 Like
#1645

  1. They are the part that the blockchain ledger actually keeps record of. So the ledger doesn’t say that I have for example 2 btc in my account. The ledger will see that I have received 1.0 and 0,4 and 0,6 BTC sometime before that I haven’t spent yet. Those received numbers of BTC that I haven’t spent yet are UTXO’s.

  2. The transaction will not go through. I do not have enough ‘balance’ we would say in the banking world

  3. It will usually check other transaction fee’s to find the best fitting fee. But there are wallets where you can choose the fee yourself. Besides the fact that the amount of btc you spent equals the amount your account has. So for example when I have 0,5 btc and send 0,4 to my friend… I also send 0,1 to myself in order to keep the ledger complete on both sides (debit/credit) idea. But the transaction fee will be for example 0,05 btc… so I would send 0,4 to my friend, 0,05 to myself and 0,05 to miner fee. The wallet will calculate that amount to send back to myself after fee.

  4. You could increase the amount of output adresses. Nobody can see on the blockchain ledger your identity so making more adresses makes it even harder to track the funds.

1 Like
#1646

  1. UTXO are funds which I have received which the wallet queries the blockchain which is controlled by the private key

  2. The wallet would construct a transaction of other available UTXO which the private key controls which makes up for the purchase and use the entirety and return the surplus as UTXO back to me minus the fees. If there is not enough available then the transaction will be denied by the nodes

  3. They take the fees average at the time and work this out for me at the time of constructing the transaction to ensure that the transaction goes through in a timely manner. There are wallets available which I am able to specify the fees myself.

  4. I am able to send funds out to other wallets which I am in control off and looking at the blockchain ledger, this would not be distinguishable if I am or a not the owner of the private keys

1 Like
#1647
  1. any bitcoins that have been sent to you that you have not spent yet.
  2. outta luck pal
  3. fee is based off of past transactions and will be shown as the difference of outputs and inputs
  4. create several outputs to different accounts that go back to you.
1 Like
#1648
  1. Unspent Transaction Outputs (UTXO) are the funds in a wallet that are available for spending.
  2. If you don’t have any single UTXO that is large enough to cover a transaction, then multiple UTXOs would need to be organized to cover the expense. The amount would also include change to the sender and transaction fees.
  3. The transaction fee would be the difference between the input and the output totals.
  4. To increase privacy, multiple addresses could be used. For example, one of the outputs could be going back to the sender, and this could be done privately.
1 Like
#1649

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

    they are transactions that have not been spent, but ready to be 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 doesn’t go through and gets canceled

  1. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    The fee gets calculated from the rest of the inputs and subtract the outputs of transaction

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

adding more inputs and outputs to a transaction. harder for humans to trace on their own

1 Like
#1650
  1. UTXO are unspend transactions you have recieved earlier.
  2. The wallet will add more utxo’s together and use that. If its still not enogh the transaction will be rejected.
  3. As the difference between input and output (including left over returned to yourself)
  4. Maybe generate new adresses by using new wallets istead of using the same every time.
1 Like
#1651

  1. Unused satoshi sent to a wallet.

  2. The transaction will not go through.

  3. It would specify the transaction according to the byte size and it would

  4. Multiple inputs and multiple out puts to addresses your own may help increase privacy

1 Like