Homework on Bitcoin Transactions and UTXO - Questions

Blockchain and Bitcoin 101
#1752

Just the inputs, which become your unspent outputs :slight_smile:

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#1753

This prevents your funds, but doesn’t really enable true privacy. One way you can increase it is by using a new address every time you receive a tx :slight_smile:

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#1754

Coins are not stored in your wallet, but on the blockchain :slight_smile:

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#1755
  1. Unspent transaction outputs (UTXO) are the unspent outputs of sent inputs.

2.The wallet will add up all the smaller UTXOs together to make a combined balance to spend.

  1. The wallet will take the difference between the inputs and outputs.( Input-output) based on the best previous transaction fees on the blockchain. Higher the fee the faster the transaction.

  2. The inputs could have several output addresses that would make it difficult to know identity behind them or if they are being sent back to the sender or someone else .

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#1756
  1. The result of the transaction inputs that, combined with the transaction fee, equal the input
  2. Multiple UTXO can be used as inputs
  3. The wallet looks like the blockchain to see recent fees and uses a reasonable fee to get your transaction processed
  4. Multiple inputs and outputs can be used together in a transaction which makes it harder to trace back where the funds came from and went
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#1757
  1. the cryptocurrency you receive that is in your wallet.
  2. use more than one UTXO, then pay yourself the difference on seperate transaction, like change.
  3. based on difference between input and output.
  4. more hashes.
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#1758

Coins are not stored in your wallet, you can only see the balance there which is the sum of UTXOs on the blockchain :slight_smile:

This wouldn’t help much, you can use a new address each time you receive money to make it harder to know to whom the coins belong to :slight_smile:

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#1759

I have a question . I am basically bit confused about Input and out transaction . As Ivon gave an example of 0.5 and 0.4 btc input transaction , in which he has to send 0.7 btc to buy the bycycle .So what he did was , he made two separate transaction of 0.7 and 0.2 btc , in which 0.7 goes to the bycycle owner and 0.2 goes to the own wallet . So my question is , why do i have to send 0.2 btc in my own wallet ?? i mean the total amount ( 0.9 btc )was anyways coming to my wallet and i could have made just one transaction of 0.7 btc to the bycycle owner and the remaining 0.2 btc is in my wallet anyways … Why do i have to do 2 transaction ??? Hope you understand my question …

#1760

No , i dint understand UTXO . I just have the basic understanding that whatsever i have in my wallet , i can send it to the receiver . I do understand a bit that UTXO is basically a unspent transaction out but how would i keep a track of different UTXO received by me ? I mean , people just see the balance in the wallet and spend or send accordingly . :slight_smile: seriously confused . I think i am missing a point here …

#1761

Hi @Riteshtrivedi :slight_smile:

First of all these are not two transactions. This is one transaction that has multiple inputs and outputs (in this case 2 of each).
When you are constructing a transaction you must always use the entire balance of an UTXO or use the sum of multiple UTXOs that have a greater value than the one you want to send. For this reason you must also create an output back to yourself (the change) to get the remaining funds back to your account.
Not doing so would result in the remainder go to the miner as a fee, since tx fees are calculated using:
input - output = fee :slight_smile:

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#1762

UTXOs are transactions that add up to your total allocated amount of a certain cryptocurrency. For example, if you have two transactions that go to your wallet, one at .3 BTC and another at .6 BTC, you would have a total of .9 BTC of UTXOs allocated to your wallet. To put it simply, if you were to spend .7BTC, the UTXOs will be spent (can no longer be used again) and you will have a new UTXO of .2 BTC that would be used for a future transaction.

If there aren’t any UTXOs that are large enough to cover a transaction, you would send as many UTXOs until the transaction amount is covered. After the transaction takes place, you would receive change in the form of a new UTXO that gets sent back to your wallet.

In a Bitcoin transaction, the fee is calculated by subtracting the input by the output.

For transaction inputs/outputs, you could very well use many multiple addresses to mask the Personal Identifiable Information (PII) of the sender/receiver. Additionally, public addresses can be anonymized by limiting the amount of information that is being displayed. Just like in the stock exchange, you make the trade public on the ledger, but you don’t announce who made the trade.

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#1763
  1. A UTXO is the balance remaining in your wallet from other transactions.
  2. You would use several and pay yourself the remaining change.
  3. Input - Output = Transaction fee
  4. You could use many inputs and outputs to make it harder for someone to track.
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#1764

UTXO’s are previous inputs that are now outputs that can be spent, the sum of all your UTXO’s is how much BTC you have in your wallet available to spend.

Your wallet will put together a sum of UTXO’s larger than the required transaction and receive back the difference minus fees.

The wallet will check the blockchain for tx fees and it will automatically advertise a tx fee that will make the transaction fast enough . Also there are wallets that will let the user choose the tx fee. Input minus output equal tx fee.

Privacy can be achieved by sending and receiving BTC using multiple anonymous wallets ( non KYC)

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#1765

Homework on Bitcoin Transactions and UTXO - Questions

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

Unspent Transaction Outputs (UTXO) pretty much explain themselves. They are unspent outputs following an input into 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 read the blockchain and add the total number of UTXOs together. If you do not have enough UTXOs to cover a transaction, your transaction will be rejected by the node.

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

The transaction fee is specified by taking the total inputs less the total outputs. The remaining amount is the transaction fee. A higher transaction fee will likely result in the transaction being added to the blockchain faster by the miners.

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

To increase privacy of your transactions, you could send multiple transactions to multiple addresses owned by yourself. Addresses are anonymous therefore no one can tell who you are transaction with.

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#1766

Describe what Unspent Transaction Outputs (UTXO) are.
UTXOs are unspent outputs of the previous transaction.

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#1767

Describe what Unspent Transaction Outputs (UTXO) are.
UTXOs are unspent outputs of the previous transaction.
What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
The transaction would not get executed unless the UTXO is large enough.
How would a bitcoin wallet specify the transaction fee when creating a transaction?
Generally, inputs take away the outputs will give you the fee. The fee will be proposed for example the wallet will check the blockchain for previous fee’s and recommend the most appropriate fee.
How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
This could be achieved by sending to greater amount of addresses then one input.

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#1768
  1. it is added up to be your wallet balance
  2. It would combine several unspent utxo cover then TX and return the rest back to your wallet.
    3.it is utxo-utxo input = fee
    4.use many different address to make transactions a harder to track.
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#1769
  1. UTXO indicates the amount of bitcoin a wallet can spent. The wallet’s UTXO’s can be seen as the wallet inputs, this is always the max amount the wallet can spend, excl. fees.
  2. The transaction will not execute
  3. The transaction fee is estimated based on previous fees paid, the user can also set the fees, but if the fees are to low the transaction will not be included in the blockchain.
  4. You can sent BTC to yourself to another BTC wallet address where nobody knows that the receiving address is also yours.
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#1770

Thank you so much Alko … It means I am lucky enough to not faced this situation of sending Bicoin to somebody else otherwise i would have ended up in huge loss by paying heavy transaction cost ?? Is it ?? I did send lot of other cryptos ( except btc )but dint face this thing before .

#1771

Modern wallets handle this on their own so you don’t have to worry about it.
This becomes important to the user is when one wants to create a raw transaction on their own :slight_smile:

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