Homework on Bitcoin Transactions and UTXO - Questions

Blockchain and Bitcoin 101
#1732

UTXOs are linked to an address and can be seen on the blockchain. If you can link the address to a person, you can track his/her balances. To mitigate this you can use a different address every time you receive coins :slight_smile:

1 Like
#1733

Actually if the mempool is not to saturated you can make a transaction without fees. In the beginning this was quite easily achievable, but today its practically impossible :slight_smile:

#1734
  1. Unspent transaction outputs are the balance from previous transaction inputs.
  2. If you only had 1 UTXO that wasn’t large enough to cover the transaction, the transaction would not be completed (can’t spend what you don’t have). If you had multiple UTXOs and they totalled the same or more of the transaction then the transaction would be completed.
  3. A bitcoin wallet specifies the transaction fee by looking at previous TX fees on the blockchain and proposing a fee.
  4. To increase privacy for your transactions you could use multiple wallets for your inputs and outputs.
#1735
  1. Describe what Unspent Transaction Outputs (UTXO) are -
    This is the balance of tokens/coin transactions left in your wallet.
  2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
    Transaction would be rejected unless the sum of the UTXO’s is greater or you you gather more inputs first.
  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    Typically results from the difference between the transaction inputs and outputs. However some wallets allow users to specify fee depending on what speed is preferred for the transaction.
  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    Either increase the number of output transactions or generate different output address.
1 Like
#1736
  1. utxos are outputs that were not spent in your transactions.
  2. your transaction does not get confirmed, it is invalidated.
  3. transaction fee is input-output.
  4. to always use a different address for transactions.
1 Like
#1737
  1. It represents an ownership of a particular value on the blockchain. It is associated with your private key.
  2. Your wallet will send a greater or equal sum of the UTXO-s out and you will receive back the difference minus the transaction fee.
  3. You wallet will check and pick the current trend for transaction fee or you can set it manually.
  4. Use a wallet backed by your own full node, or use client-side filtering.
1 Like
#1738

And how do we calculate the total fee? :slight_smile:

2 Likes
#1739

There is always a possibility that you could combine multiple UTXOs. If the sum of all UTXOs is large enough, then we can make the transaction happen. Otherwise, the transaction would be invalid. :slight_smile:

2 Likes
#1740

Increasing the number of outputs can also increase your privacy. :smiley:

2 Likes
#1741
  1. The UTXO is the sum of remaining amounts in your wallet.
  2. The transaction will be denied due to not enough UTXO in your wallet
  3. Fee = Input amount minus the output amount
  4. Multiple addresses to receive the transaction
1 Like
#1742
  1. Describe what Unspent Transaction Outputs (UTXO) are.

They are amounts received at a bitcoin address that can be used in a new transaction.

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

If the input UTXO total is enough to cover the cost, the transaction will succeed. Otherwise, the transaction will be rejected by the blockchain network.

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

Subtract the UTXO outputs from the UTXO inputs.

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

The person controlling the input and output bitcoin addresses for a transaction can be the same and can therefore effectively change their address to obfuscate the flow of their transactions.

1 Like
#1743

Homework on Bitcoin Transactions and UTXO - Questions

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

"That one BTC that Alice sends you is actually considered a UTXO for you!

Unspent Transaction Outputs (UTXO): list of “unspent” Bitcoin amounts that have been sent to a user, but have not yet been sent from him/her. The sum of these outputs is the user’s total balance.

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

your wallet would look for one or more unspent outputs assigned to your address — and use them as inputs to the recipient. If a single UTXO isn’t large enough to satisfy the demand of the input amount,
then the wallet will use a second, a third, etc until the total is greater than or equal to the amount your sending.

3) How would a bitcoin wallet specify the transaction fee when creating a transaction?
While the fee does not depend on the amount you’re sending, it does depend on network conditions at the time and the data size of your transaction.

4)How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
you could sort and mix them so they are easily interchanged but not linear in nature.

1 Like
#1744

Thank you Alko for this explination! I understand that it not known which adres belongs to which person… like my home adres is known on the citymap, but it does not tell who is living there…

You tell “If you can make physical connection of one person to an adres…” does that mean that someone would try to find out? how can this be prevented?

#1745

I believe you wanted to say INPUT - OUTPUT= FEES @Crypto_Daddy.

Thanks for the short and concise answer.

1 Like
#1746

1._ IS the balance in the wallet ,and is the result of the inputs and outputs
2._ Is not validated/ denied
3._ Is the result of the difference the inputs and the outputs.
4._ creating more outputs adresses .

1 Like
#1747
  1. UTXOs are transaction outputs that are available for use in the bitcoin network. Unlike spent output which have no practical use except for tracing purposes, an UTXO may be spent provided that its corresponding private key is available to unlock the UTXO
  2. If there is not enough value of bitcoin in any single UTXO for the transaction, other outputs in the blockchain that are locked to the same address will be used. The total UTXOs value should be either equal or higher than the required transaction value. If the value is higher, the transaction should also include ‘change’, that is, an output to be sent back to the sender with the required amount of bitcoin.
  3. A transaction fee is calculated in a bitcoin wallet by reducing the amount of change to be sent in an output back to the sender so that the difference could go to a miner. Depending on how busy is the network, wallets may recommend increasing the fee to enable a transaction to be added to the blockchain and confirmed more quickly.
  4. Every input and output in the blockchain have a lock on it which basically means that it cannot be used by anyone else. So, an UTXO is locked with its corresponding private key, and it cannot be accessed by a third party. As a transaction gets prepared for sending, any inputs used will become outputs, and these are also protected by a signature and a public key, which derive from the private key. This prevents any third party from accessing the transaction and enables privacy.
1 Like
#1748

Mauro

The TX fee is calculated as: input - output = TX fee

2 Likes
#1749
  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. UTOXs are incoming transaction into your wallet which has not been spent.
  2. The blockchain nodes will find out that you have insufficient amount, and they will reject your transaction.
  3. Fee = input - output. A wallet will search the recent transaction fees at that time and set the fee for your transaction. This depends on network availability. Some wallet also let you change the fee.
  4. If you send a bitcoin to multiple wallets, send from each of these wallets to multiple wallets, and continue doing the same transactions, then this will be harder to track who owns how much of original bitcoin.
1 Like
#1750

1.what you have unspent in your wallet…like an account balance
2.you would combine 2 smaller UTXO to cover the transaction (like the example of giving 2 $5 bills to pay $7). If you still did not have enough UTXO’s it would be invalid.
3. Fee= input - output
4. Sending the output to multiple addresses makes it harder to see where the output is going

1 Like
#1751

When you make KYC on an exchange they know who you are and what addresses you used to withdraw your coins to. You can prevent this by using an exchange that does not require KYC or use other forms of acquiring your coins like using Local Bitcoin or a Dex like Bisq

1 Like