What is UTXO in the bitcoin network?

What is UTXO in the bitcoin network?

Author: Robert Strickland (crypto expert)

What is UTXO in the bitcoin network?

  • What is UTXO in the bitcoin network?

The problem of re-spending on the bitcoin network is a serious problem for many users who do not know how to protect themselves from it. In this article, we will discuss what UTXO is and what the dangers of re-spending are.

  • What is UTXO?

UTXO (Unspent Transaction Output) is a small incoming payment that is an unspent output on the bitcoin network. When a transaction in the bitcoin network takes place, the outputs of previous transactions are spent and new ones are created that will be used in future transactions. It is UTXO that is the displayed balance on your wallet.

The peculiarity of UTXOs is that they must be spent each time they are used as inputs. Let's take an example: you have 5 BTC in your account and you need to send 0.001 BTC to another address. In this case, you can use the following bitcoin network feature: you can send 0.001 001 BTC to the recipient and 4.9985 BTC to your own wallet. In this case you will pay a 0.0005 BTC commission. Many wallets now accomplish this operation automatically.

As a result, there is no intermediate state for UTXO: they are either spent or not. Full nodes monitor the global UTXO set to make sure that transactions are not duplicated on the network.

  • The dangers of a hardforward for UTXO

Now consider the situation when a hardforge occurs. If the blockchain lacks a system to protect against re-spending, all UTXOs are at risk. Once the fork happens, incompatible blocks are created, causing the UTXO set to become different.

Note that a hardfork only poses a threat to UTXOs if you will be transacting directly at the time of the chain split. If you are just storing your bitcoins in a wallet, however, there is no threat to you.

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