Homework on Bitcoin Transactions and UTXO - Questions

[Crypto_Daddy]

ok so that answer wasnt all the way correct. thanks I got it now to keep that in mind

[Stefano]

1. UTXOs can be simply considered as the money one can spend. UTXOs are related to those transaction’s output that are previously sent to me and that I can redeem as mine when I want to spend them.
2. It’s not important that a single UTXO is large enough, while it is important that the sum of all my UTXOs (particularly those referred to the same address) is large enough to cover my transaction.
3. Transaction fees are not specified by the wallet but are simply derived as the difference between Inputs and Outputs as follow -> Inputs - Outputs = Fees
4. I could use multiple inputs and outputs to achieve a higher level of privacy, in order to avoid single address with high number of UTXOs.

[carmen1408]

1. UTXOs can be defined as the BTC adresses where you send the money to or the BTC that you haven’t already spent. An input is the UTXO of the previous transaction.

2. Then you wallet will sum all the UTXOs you have and if you have only one UTXO then the transaction will not be valid.

3. The wallet checks the other transactions from the blockchain to see what is the fee that would put you in a block as soon as possible.

4. Multiple adresses.

[Markshire_Crypto]

(1) UTXOs are the sum of the inputs to your wallet (or the sum of previous outputs to your wallet that have not yet been spent, hence “unspent” transaction outputs). UTXOs in simple terms are displayed as the balance in your BTC wallet.

(2) If you do not have a single UTXO that is large enough to cover for your transaction then the transaction will not go through, since you do not have the funds to spend. That is like trying to spend more money than is in your bank account (and bitcoin does not have overdraft protection).

(3) The bitcoin wallet specifies a transaction fee when creating a transaction by subtracting the outputs from the inputs. So if you have 1 BTC and send 0.7 to a friend, and 0.25 back to you then the fee was 0.05 BTC. Some bitcoin wallets calculate a reasonable fee automatically, but ideally the fee should have to be approved and should be able to be customized.

(4) You can increase the privacy of your transactions by mixing the number of outputs and sending fractions of the total amount to multiple addresses controlled by the recipient and yourself. This makes the transaction more difficult to follow.

[Mauro]

@Dreamer

4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
   Answer - despite the fact that the blockchain is a distributed ledger that is available to everybody, it does not run the tally of the totals of the amounts for the specific transaction (not to mention it does not show who and what/how much is getting as a result of a transaction). All the information is kept encrypted and all we can see the wallets to what certain amounts were sent (as input) as well as those wallets receiving certain amounts (as outputs). Therefore, when we look a the Bitcoin blockchain, all we can see is the direction of a particular transaction and the amount of the BTC that is being transacted as well as the encrypted wallets addresses that are either receiving or sending BTC. This mode of operation provides a high degree of security as well as anonymity.

There is no encryption of wallet addresses. Address is a hashed version of a public key. But you are right, we can see the direction and the amount being sent from one address to another address. What happens if I connect your identity to one of the public addresses you own. Since I know you own it I could follow you and see when that address will moves funds. Is there anything you can do to make yourself more private again? Or will I always be able to track you?

[Mauro]

@Ayin70

3. It would find a reasonable fee based on recent on chain transactions.

@carmen1408

3. The wallet checks the other transactions from the blockchain to see what is the fee that would put you in a block as soon as possible.

Correct. And how do we calculate the total fee paid?

[Mauro]

It depends on the situation. I am glad I could help you understand better.

[Mauro]

@Stefano

3. Transaction fees are not specified by the wallet but are simply derived as the difference between Inputs and Outputs as follow -> Inputs - Outputs = Fees

A transaction fee must be set by the wallet. When you create a transaction, a wallet must set the fee using a unit of measurement called satoshi per byte. Only after we set the fee, is the moment we can calculate the total fee by that formula.

[Mauro]

@Markshire_Crypto

(2) If you do not have a single UTXO that is large enough to cover for your transaction then the transaction will not go through, since you do not have the funds to spend. That is like trying to spend more money than is in your bank account (and bitcoin does not have overdraft protection).

There may be a situation in which you can combine multiple UTXOs. If the sum of all avaliable UTXOs is larger than the required ammount, then we can make the transaction happen. If not, then it would be an invalid transaction.

[jamesvoraw]

1 Describe what Unspent Transaction Outputs (UTXO) are.

A UTXO is a summation of inputs sent to your wallet address which gives you a total UTXO from a single or multiple inputs.

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

If you don’t have enough input or inputs( UTXO) plus transaction fees to cover your transaction, your transaction becomes invalid.

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

The bitcoin wallet specifies the transaction fees by checking current floating rates available in the network and decides what fees is most applicable for your transaction at the specified time of transaction.

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

By sending your UTXO to a new wallet address that you control with your private key.

[Buckwheat]

1. UTXO=unspent transaction output. The sum of the UTXO’s for a transaction is the total amount you have to spend.
2. If the sum of the UTXOs was not large enough to cover the transaction, the transaction would be rejected. However if all UTXOs were smaller than the transaction, then the wallet would sum the UTXOs and if greater than the transaction, would allocate bitcoin to cover the transaction, cover the fees, and send the remaining back to you as the next UTXO.
3. Usually the wallet would review recent transactions and propose a fee. Some wallets allow you to increase or decrease the fee to either speed up or slow down the execution of the transaction.
4. The blockchain shows only addresses, not the individuals, which is the first layer of privacy. If the wallet in addition changed the receiving address each time, that would provide an additional layer of privacy since you would never be linked to the same address.

[Fanon]

@ivan

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

In the traditional financial system, purchases can be paid in the exact amount via fiat or debit/credit cards and rounding to the nearest dollar. With Bitcoin, purchases are made with Unspent Transaction Outputs (or UTXOs). UTXOs are the ‘change’ from previous transactions.

@ivan

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

If I had a set of UTXOs–11, 7, and 3 bitcoins–totaling 21 bitcoins and my purchase cost 13 bitcoins, I could pay by combining UTXOs. For example, combining the 11 and 3 bitcoin and receiving 2 bitcoin back as change…minus the transaction fee.

@ivan

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

Transaction fees are the difference between the input and the output. The price of the fees are often determined by the wallet. The higher the fee, the quicker it is to be added to the blockchain by a miner.

@ivan

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

UTXOs are represented as alphanumeric strings. While third-parties can see the transaction’s price on the blockchain, they do not know who sent the input and who received the output. Thus, UTXOs create a layer of anonymity.

[carmen1408]

Fee = input-output

[John_Montagne]

Homework on Bitcoin Transactions and UTXO - Questions

1. Describe what Unspent Transaction Outputs (UTXO) are.
It is avaiable balance which you can spend by using your private key to send money. These were inputs before by another address,

2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
The transaction will be broadcasted to the network and everybody can see that there is not enough currency to spend and will be rejected.

3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
They subtract the input from the output. The wallet will see how much fee is needed to add the transaction to the blockchain by the miners.

4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
You can add multiple outputs that can be sent to your wallet using another address. There is no way people can know if that address is yours.

[Kristhofer_Drost1]

1. They are the next in line input. Fx. if my mom sends me 0,5 bitcoin then that counts as her output, but for me an input, which later shows the balance that can be spend.

2. Then it will not be valid.

3. That it looks or checks the previous transactions and then calcultes the difference between the two (input and output).

4. With using new adresses for the transactions.

[Kay]

1. UTXOs are funds available in your wallet
2. Transaction would be declined
3. Transaction fee is generated by the wallet upon scanning through the network and generating a sufficiently high fees for the transaction to be carried out within a reasonable time. input = output + tx fees
4. Inputs and outputs can come from and end up in any given wallet

[Simon_Martin]

1/ UTXOs are the inputs you have received but have not spent.

2/ If you don´t have a single UTXO to cover your transaction, the wallet would sum up the funds from other UTXOs in order to pay the transaction, and then credit your account with the appropriate change (after the deduction of the transaction fee).

3/ The wallet will subtract the input from the output and will specify (suggest) a fee based on the current and previous recent transaction fees.

4/ Addresses do not correspond with people’s names therefore you can spend your UXTOs by sending transactions to multiple addresses including sending to yourself by using different personal wallets

[Jiri87]

1. Amount of funds on the particular address which are available to spend by sending it to another address.

2. Transaction isn’t possible.

3. Most wallet do this automatically by setting up a fee which is large enough to complete the transaction in a reasonable time, but there is also an option to set the fee manually.

4. Privacy can be increased by using using more inputs and more outputs to obfuscate the flow of funds.

[Frank]

Homework on Bitcoin Transactions and UTXO - Questions

1. Describe what Unspent Transaction Outputs (UTXO) are.
   Answer: UTXO’s are the collective amount that has been sent to a recipient, like an unspent amount of btc etc.
2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
   Answer: Your transaction will be rejected by. Noone will confirm the transaction if the fee isn’t covered
3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
   Answer: A wallet will normally calculate the fee and show the amount specified in the transaction details. The wallet will tell You if You don’t have enough in Your wallet to cover the fee.
   The fee would be: Input-Output = Fee
4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
   Answer: You could create a transaction that will send Your BTC to one recipient of a given amount and then the rest to another or several others or yourself. This gives a bit of anonymity and privacy when it comes to tracking your transactions.

[kryptoshroom]

1. all utxos are you wallet balance you can spent
2. the transaction is invalide when you have not enough utxos
3. the wallet checks the blockchain and figures out the correct fee. in some wallets you can choose the fee by your own.
4. use different addresses for receiving utxos