Crypto glossary

UTXO

A UTXO (unspent transaction output) is a piece of bitcoin created by an earlier transaction that has not been spent yet. Your wallet balance is the sum of all UTXOs your keys can unlock, and new transactions spend them as inputs.

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Coins as outputs, not balances

Bitcoin does not keep an account balance for each address. Every transaction consumes some existing outputs as inputs and creates new outputs, each locked to a recipient. Outputs that have not yet been used as inputs are the UTXO set, the full list of spendable bitcoin that every full node keeps track of.

A UTXO must be spent in full. If it is larger than the payment, the transaction sends the rest back to you as a new output called change. Ethereum, by contrast, uses an account model in which each address simply has a balance.

A worked example

Say your wallet holds two UTXOs, one of 0.3 BTC and one of 0.5 BTC. You want to pay 0.6 BTC. Your wallet uses both as inputs, totalling 0.8 BTC. It creates one output of 0.6 BTC for the recipient and a change output of about 0.1999 BTC back to an address you control. The remaining 0.0001 BTC, the difference between inputs and outputs, is the transaction fee collected by the miner.

Why the model matters

The UTXO model makes it straightforward to check for double spending: a node only has to confirm that each input exists in the UTXO set and has not been spent. It also affects fees, because fees depend on transaction size in bytes, and every extra input adds bytes. A wallet full of many small UTXOs can be expensive to spend when fees are high.

Privacy is affected too. Spending several UTXOs together suggests they belong to the same owner, a pattern chain-analysis firms use to link addresses.

Practical tips and pitfalls

Very small UTXOs, known as dust, can cost more in fees to spend than they are worth. Some wallets offer coin control, which lets you choose which UTXOs to spend, useful for both fees and privacy. Change outputs go to new addresses, so a balance that seems to move unexpectedly is often just change, not a theft.

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Frequently asked questions

Is my bitcoin balance stored somewhere as a number?

Not on the blockchain. Your wallet calculates it by adding up the UTXOs your keys control.

Why did my transaction create an output to a new address?

That is usually change: the unspent remainder of your input returned to an address in your own wallet.

Do other blockchains use UTXOs?

Some do, such as Litecoin and Cardano's extended UTXO model, while Ethereum and many others use account balances.

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All glossary terms · Educational reference only — not investment, legal, tax or financial advice.