Homework on Bitcoin Transactions and UTXO - Questions

Blockchain and Bitcoin 101
#1892

  1. Describe what Unspent Transaction Outputs (UTXO) are.
    A UTXO is a record of unspent transactions available in a wallet. They represent the inputs from the previous transaction into your wallet.

  2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
    Your wallet computes the sum of all UTXOs in it. If this sum is equal to / exceeds the total required for the transaction output + fees, then the wallet will create the transaction.

  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    The wallet will query the blockchain for recent tx fees on the network, and then may recommend or choose the fee that allows your transaction to happen at a reasonably fast time. The wallet may also offer the user tx fee options for faster transactions, or allow the user to make that choice. HOWEVER, the equation INPUT = OUTPUT + Tx FEE will always be respected in all cases.

  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    A transaction will always respect the INPUT = OUTPUT + Tx fee equation. Assuming sufficient UTXOs in the address to honor this equation, the output will also include transactions back into a different wallet address controlled by the transaction creator - i.e. if the available UTXOs in the wallet is more than what is required for the output + tx fee. On the block explorer, this transaction appears as such, showing the output address as well as user-controlled wallet address. From the outside (block explorer), it is impossible to detect the real nature of that transaction - i.e. what component went to (say) an external merchant, and what went back into a different user-controlled wallet address). Obviously, if the UTXO is exactly equal to output + tx fee, then there is no transaction back into a user-controlled wallet address.

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#1893
  1. UTXOs are a result of a transaction output and in turn used in another transaction, creating more UTXOs.
  2. Use multiple inputs to exceed transaction + fee and send the remainder to a new address you control.
  3. Inputs - Outputs = Fee
  4. Send multiple transactions through an address you own but have no identity connected with e.g paper wallet.
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#1894

*** Describe what Unspent Transaction Outputs (UTXO) are.**
These are unspent transaction outputs so they are the transactions sent to you that have not been spent or sent to someone else
*** What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?**
You can use other UTXOs as well to cover the transaction if there arent enough to cover , you would not be able to make the transaction
*** How would a bitcoin wallet specify the transaction fee when creating a transaction?**
Depending on the congestion in the network the wallet dynamically calculates a suitable transaction fee also you may be able to set the priority of amount yourself to ensure that the transaction is favoured by miners if you want a quick transaction.
*** How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?**
New addresses could be generated so that it is not clear it is going back to the same individual (wallet address ) therefore people would not know exactly , however blockchain .com can make a good guess.

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#1895
  1. basicaly are inputs to wallet, sum incomming payments and returned unnspent outputs
  2. transaction become unspendable
  3. in Sat per byte acording crowd in mempool? Shows separately as info, but are involved in whole transaction (payment) value
  4. No reuse address, use all the time new. Better… be xmr user
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#1896

Homework on Bitcoin Transactions and UTXO - Questions

  1. Describe what Unspent Transaction Outputs (UTXO) are.
    It is the Ledger balance of your a/c i.e what is the unspent.

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

The request or order what not be valid and would not work, the Blockchain ledger doesn’t allow you to be ‘overdrawn’ in the simplest sense

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

I think the fee is decided by the miner or broker whoever is sending the info to all the ledgers and the wallet can see this message and you have the option to accept or decline or even expedite it quicker by increasing to another level of agreed fee.
4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction? Whatever you do its going to be public in the BC but one could send numerous transfers to numerous wallets in order to confuse the follower of who and where but not what.

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#1897

  1. Unspent Transaction Outputs (UTXOs) are the outputs of a transaction. They will act as the inputs of a future, yet-to-be determined transaction.

  2. You can use multiple UTXOs as inputs to cover a single transaction, similar to using multiple paper currency bills to pay for something that costs an inbetween amount. Then one of the UTXOs that will come out of the transaction will be sent back to you as change.

  3. Fees do not need to be specified on the blockchain. As long as you know the inputs (former UTXOs) and the outputs (the newly created UTXOs) then we know that INPUTS - OUTPUTS = FEES

  4. You can send cryptocurrencies to multiple addresses in one single transaction. If one of those recipient addresses was your own address, then it is not obvious who owns the UTXOs. The anonymity of the addresses thus creates an in-built layer of privacy in the blockchain.

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#1898

  1. Right! No bitcoin in the wallets. So the UTXOs come from the blockchain.

  2. I personally have multiple wallets. I would send one transaction to the recipient and another to my desktop wallet from my hardware wallet.

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#1899
  1. UTXO-is unspent transactions
  2. Than the transaction will not go through
  3. Fee is determined by how load of the network is at the time of the transactions
  4. By using several inputs and outputs (?)
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#1900

Homework on Bitcoin Transactions and UTXO - Questions

  1. Describe what Unspent Transaction Outputs (UTXO) are:
    It is the amount of crypto 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?
    The transaction would fail and not go through.
  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    it calculates the amount through putted then adds the fee.
  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    Further encrypt the transaction and the private key.
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#1901

It would add up all UTXOs to make the transaction.

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#1902

Correct, but you can just use a new address each time you receive funds, don’t need to move the one you already have :slight_smile:

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#1903

Actually on the transaction level a fee is just specified as input - output = fee :slight_smile:

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#1904

You don’t have to use multiple wallets. Most modern wallets today are so called HD wallets that can generate a new address from a master seed and each time you want to receive funds you will get a fresh new address. These wallets also track their own “change” addresses that are generated each time you send funds :slight_smile:

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#1905

Depends…do these outputs and inputs all point to the same addresses? :stuck_out_tongue:

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#1906

What if you combine multiple UTXOs together?

What do you mean? Isn’t there a more straight forward way to calculate fees?

Hmmm :thinking: wouldn’t that potentially result in your funds being locked due to pointing to an unknown number?

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#1907

  1. The output of a previous UTXO that was received by you is now considered the unspent amount of bitcoin that can be used as an input on your next UTXO transaction.

  2. Your newly created UTXO will include 2 or more inputs from previously received UTXO’s

  3. You can specify the amount of the transaction fee that will be subtracted from total output amount.

  4. When your output of the UTXO’s has “change” that will be sent back to yourself you can substitute your input wallet address with another Bitcoin address that is controlled by you. Which can give you an extra step or layer of anonymity if needed.

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#1908

ah yes, good point. How does Grin work? do you know?

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#1909

Not exactly sure yet, but there is a topic about Mimblewimble in the privacy course, which I’m attending at the moment :slight_smile:

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#1910

Thank you. I realize I could make a new address within my hardware wallet, but I didn’t realize the potential.

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#1911

  1. Describe what Unspent Transaction Outputs (UTXO) are. - An output from the previous transaction that are unspent/unused.

  2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction? - You would not be able to make the transaction. You would need to combine it with another(s) UTXO to equal/or greater the output needed to cover the transaction.

  3. How would a bitcoin wallet specify the transaction fee when creating a transaction? Inputs - outputs = fees, which is what is left of the inputs.

  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction? - You can transfer the inputs to multiple wallets with some possibly being another one that you own.

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