Transaction

Peeling down a single transaction reveals several different structures in a transaction that have different semantic meanings. The following are the different structures present in the transaction:

  1. Transaction version number: It is a version number specifying the type of transaction to the network. Through the transaction number, a node can determine the set of rules to be used to verify this particular transaction.
  2. Output: Transaction output consists of a cryptographic lock and time.
  3. Input: Transaction input consists of a pointer and an unlocking key. The pointer points to the previous transaction output. The unlocking key is used to unlock the previous output the input points to. Every time output is unlocked by an input, it is marked in the blockchain database as spent.
  4. Lock Time: It specifies whether a transaction can be included in the blockchain right away or after some specified time.

UTXO is all those outputs that are yet to be unlocked by an input.

Once an output is unlocked, they are removed from the circulating supply. The new outputs take their place. Thus, the sum of the unlocked outputs will always be equal to the sum of values of the newly created outputs.

What is a UTXO?

In bitcoin, the transaction lives until it has been executed till the time another transaction is done out of that UTXO. UTXO stands for Unspent Transaction Output.

How is a UTXO created?

UTXOs are created through the consumption of existing UTXOs. Every Bitcoin transaction is composed of inputs and outputs. Inputs consume an existing UTXO, while outputs create a new UTXO.

UTXO Model

The UTXO model does not incorporate wallets at the protocol level. It is based on individual transactions that are grouped in blocks. The UTXO model is a design common to many cryptocurrencies, most notably Bitcoin.