An unspent transaction output, better known as a UTXO, is an important concept in the world of blockchain. The name might seem a little confusing but the concept itself is not hard to understand. This post will explain everything you need to know about UTXOs.
UTXO Explained With A Simple Analogy
An unspent transaction output is the output of a transaction that a user receives and is able to spend in the future. This is true because, as the name suggests, it is the unspent output of a transaction. But what does this mean, exactly? An analogy will be helpful in making UTXOs clear.
Each and every UTXO is like a single fiat coin or a single fiat bill. If you have $45 in cash, you must have more than one bill because there’s no such thing as a forty-five dollar bill. So while you have $45 dollars in your wallet, you may have any number of combination of bills— UTXOs— sitting in your wallet.
In this simple example, you could have any of the following combinations of fiat bills:
- Forty-five $...
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