Homework on Bitcoin Transactions and UTXO - Questions

Blockchain and Bitcoin 101
#1952

  1. Describe what Unspent Transaction Outputs (UTXO) are.
    It is basically transactions or btc you received which has not been spend yet

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

  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    Input= Outputs + fee

  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    You can use multiple address and even send to your own address

1 Like
#1953
  1. Describe what Unspent Transaction Outputs (UTXO) are:

These are outputs from previous transactions.

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

The wallet will add multiple UTXOs, until the value is larger than the transaction. It needs to be larger than the transaction value as a transaction fee must also be included.

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

It queries what recent transactions fees have been on the blockchain and proposes and suitable about that will give a satisfactory rate of confirmation. If you need to do a faster transaction, you can propose a higher transaction fee.

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

You could create lots of outputs to a transaction, and new addresses. I think hardware wallets create the new addresses automatically. Not so sure on the inputs, unless you are generating lots of outputs to yourself.

1 Like
#1954
  1. Describe what Unspent Transaction Outputs (UTXO) are.
    -UTXO’s are unspent outputs from a previous transaction.

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 a single UTXO to cover a transaction, multiple UTXO’s will be used so long as there are enough to cover the transaction.

  1. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    -A bitcoin wallet specifies the transaction by subtracting the inputs from the outputs of a transaction.

  2. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    -You can use transaction inputs and outputs to increase privacy by transacting multiple outputs to different addresses that you own.

1 Like
#1955

1)the numbers that somebody had sent to you or the numbers that you are sending to someone .
2)you send a sum of utxos to the reveiver and get some change after
3)the fees=inputs-outputs
4)i could mix a bunch of utxos in a block or enable a kind of an automatic mixer mechanism into my blockchain.

2 Likes
#1956

What if someone knows your address? :slight_smile:

1 Like
#1957

Not just hardware wallets but all HD (hierarchical deterministic) wallets do that :slight_smile: They also create a change address where the change from the transaction is sent back to you.

1 Like
#1958

Actually these are just the ones received, but not spent yet.

You could start a new blockchain with that utilize masternodes for private send (which is not really that private) like in Dash, but this is a Bitcoin specific thread :wink:

1 Like
#1959

Response

  1. UTXO’s are the transactions that were sent to an address that haven’t been spent anywhere yet.
  2. If the amount your trying to send is larger than what you have, your wallet searches for other UTXO’s that it can merge together with in order to create an output that is sufficient to cover the amount needed.
  3. The fees calculated from a wallet are either recommended to you (based on what other TX are paying at that time) or you are allowed to input what you want to spend depending on which wallet you are using. If you set your own amount, it runs the risk of not being picked up by miners when the fee is too low as it will get passed up.
  4. You can try to remain anonymous by sending out to multiple addresses that you control so that it appears as though you spent all of your previous UTXO’s and no longer hold that “balance.”
1 Like
#1960
  1. UTXO’s are unspent bitcoin transactions sent to your wallet that you need to spend by either sending to someone else or back to yourself.
  2. Your wallet is responsible for calculating your current balance so if you have enough funds in total from all UTXO’s then your transaction will be covered.
  3. Your wallet will calculate the transaction fees based on recent transactions on the blockchain and ensure that ultimately all inputs = outputs + fees.
  4. Transaction inputs create outputs to various bitcoin addresses but it is impossible to know whether the bitcoin is going to other people or back to the original sender - this adds another level of anonymity and privacy.
1 Like
#1961

  1. Describe what Unspent Transaction Outputs (UTXO) are.
    The UTXO transactions represent input transactions to the recipient of the transaction. The sum total of all these UTXOs represents the total currency units that are available for spending by the recipient of the UTXOs.

  2. What would happen if you don’t have any single UTXO that is large enough to cover for your transaction?
    If a single UTXO is not large enough to cover my transaction but I have other UTXOs that together sum up to an amount great enough to cover my transaction, then those UTXOs will also be used in my transaction.

  3. How would a bitcoin wallet specify the transaction fee when creating a transaction?
    The wallet will look at the recent prior transaction fees in the blockchain and propose a fee that will be reasonably sufficient to get your transaction into the blockchain.

  4. How could you use the notion of transaction inputs and outputs to increase privacy in your transaction?
    To increase your privacy so that no one knows how much currency you have in UTXOs you could perhaps use multiple wallets.

1 Like
#1962

Unspent Transaction Outputs (UTXO) are the btc you have received and are lying in the blockchain. Your wallet tracks the UTXOs and totals them up to give you the sum of bitcoins you have received in order to construct a transaction.

If you don’t have any single UTXO that is large enough to cover for your transaction, the wallet will query the blockchain on whether you have other UTXOs and total them up to give you a sum which if equal or greater to the transaction. It will then construct the transaction. It will also calculate the fees and broadcast the transaction and the input will be equal to output + fees.

A bitcoin wallet will specify the transaction fee when creating a transaction by looking at the previous fees paid in the blockchain and suggest a fee to you which will be close enough in order to reasonably confirm the transaction fast.

The notion of transaction inputs and outputs can be used to increase privacy in a transaction because I can send bitcoin to myself without anyone knowing that I sent the transaction to a bitcoin address I own.

1 Like
#1963

Yes, I forgot about that part.

#1964

  1. UTXO’s are outputs from some else’s wallet. You received BTC from a previous transaction, and they are unspent.

  2. You would have to use more than one UTXO to cover the transaction and send the rest of that second UTXO back to yourself.

  3. A bitcoin wallet allows you to choose the fee you are willing to pay, but provides a suggested fee based on previous fees to get you on the blockchain relatively quickly.

  4. Use different bitcoin wallet addresses when receiving bitcoin.

1 Like
#1965
  1. Available bitcoin balance
  2. The wallet would combine the UTXOs
  3. The difference between the input and output UTXOs. Also, the wallet does it based on the fastest time to get you on the blockchain
  4. Diffrent blockchain addresses.
1 Like
#1966

UTXO’s are unspent transaction outputs. old transaction inputs that haven’t been spent yet.

You would have to combine it with other inputs/UTXO’s to cover the transaction, and can send the remainder back to yourself.

The fee would be total input - total output (What I don’t understand is how a fee is calculated if your output perfectly matches your input? Or if your input is much larger than the output, do you really pay the large difference in fees?)

You can’t tell who the owners of the input and output addresses are by looking at them, so if you generate new addresses for yourself (and use them as transaction outputs) it is harder to tell how much of the BTC was actually transacted to other parties and how much went back to the sender

1 Like
#1967

Ans.1)
These are transactions performed and sent to a recipient. They are termed UTXO’s (unspent transaction outputs) because they are received as an output record but unspent by the recipient who has received them.
Ans.2)
Total UTXO’s received are factored, combined, and recorded as unspent transactions in your wallet and upon the block-chain. When a transaction requires more than any, one smaller transaction output you have available for transaction creation output. Once you perform a transaction or an output, the entire amount is output but part of the transaction that is above the required recipient delivery returns to your wallet as a UTXO balance.
Ans.3)
A bitcoin wallet would search the block-chain to see what fee charges apply and recommend the best fee to enable the likelihood of being included in the next block.
Ans.4)
Use a greater number of transaction inputs as opposed to outputs.

1 Like
#1968

1/ utxo’s are unspent transactions which are tracked on the blockchain which determines the utxo balance belonging to a specified wallet’s private key
2/ the blockchain would not validate the transaction, likely
3/ the blockchain would have a record of fees that the wallet would access to make a fee calculation
4/ inputs and outputs must be at least one each, but can be more, so by using multiple output addresses in a transaction you create a more complex blockchain record whereby some of the output addresses used could return utxo’s back to the original sender

1 Like
#1969
  1. Unspent transaction outputs (UTXO’s) are the current funds you can use in transactions using a private key. Outputs in UTXO means the result of a transaction, someone sent for example 0.2 btc to your bitcoin address that 0.2 btc is now sitting in your wallet as an Unspent transaction output, this means there a never coins actually present in your wallet, only UTXO’s.
  2. If you didn’t have one UTXO large enough to cover a transaction for example you want to buy a computer for 0.5 btc but in your wallet you only have UTXO’s for 0.4 and 0.2 btc you can pool your two UTXO’s together for the transaction but send 0.1 btc back to yourself so you are not paying 0.6 btc for the computer.
  3. The fee is specified by the difference between the inputs and outputs of a transaction if the inputs of a transaction are 0.4 and 0.3 btc and the output is 0.65 btc then the fee is 0.05 btc
  4. Inputs and outputs increase privacy because you can never know if someone is sending money back to themselves or sending money to pay for a service or good.
1 Like
#1970

  1. Those are inputs that haven’t been spent yet.

  2. Spend less or get more inputs.

  3. Usually it will automatically pick the best fee for you.

4 By using different addresses when receiving funds or when sending funds to yourself.

1 Like
#1971

If the output is exactly the same as the input, that would mean you are creating a tx with 0 fee. It is possible, but don’t expect it to get into the blockchain anytime soon (or ever) :slight_smile:
Of you have a really large UTXO, you can send the change back to yourself, preferably to a new address you own. HD wallets already do this for you in the background :slight_smile:

1 Like