Unspent transaction output
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In cryptocurrencies such as Bitcoin, an unspent transaction output (UTXO) is an abstraction of electronic money. Each UTXO is analogous to a coin, and holds a certain amount of value in its respective currency. Each UTXO represents a chain of ownership implemented as a chain of digital signatures where the owner signs a message (transaction) transferring ownership of their UTXO to the receiver's public key.
The UTXO Model
The UTXO model is a design common to many cryptocurrencies, most notably Bitcoin. Cryptocurrencies which use the UTXO model do not use accounts or balances. Instead, individual coins (UTXOs) are transferred between users much like physical coins or cash.
The UTXO Set
The total UTXOs present in a blockchain represent a set, every transaction consumes elements from this set and creates new ones that are added to the set. Thus, the set represents all of the coins in a particular cryptocurrency system. The complete UTXO set can be summed to calculate the total supply of a cryptocurrency at a given point in time.
In the case of a valid blockchain transaction, unspent outputs (and only unspent outputs) may be used to fund further transactions. The requirement that only unspent outputs may be used in further transactions is necessary to prevent double-spending and fraud.
For this reason, inputs on a blockchain are removed from the UTXO set when a transaction occurs, whilst at the same time, outputs create new UTXOs, which are added to the UTXO set. These unspent transaction outputs may be used (by the holders of private keys; for example, persons with cryptocurrency wallets) for the purpose of future transactions.
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- "UTXO Set". river.com/learn/. December 15, 2020.
- "Bitcoin UTXO Lifespan Prediction" (PDF). cs229.stanford.edu. December 11, 2015.
- "Reusable Proofs of Work". nakamotoinstitute.org. August 16, 2004.
- "Hashcash - A Denial of Service Counter-Measure". hashcash.org. March 28, 1997.
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