UTXO, or Unspent Transaction Output, is a fundamental concept in blockchain technology, particularly in cryptocurrencies like Bitcoin and its derivatives. UTXO refers to the output of a transaction that has not been spent and remains unutilized in subsequent transactions. In simpler terms, when someone sends cryptocurrency to another party in a transaction, the recipient's wallet receives these unspent outputs, which can then be used as inputs for future transactions.

UTXO Properties

1) Amount: The amount of cryptocurrency associated with the output.

2) ScriptPubKey: A locking script that defines the conditions under which the UTXO can be spent.

3) Transaction Identifier (TXID): A unique identifier for the transaction that created the UTXO.

4) Output Index: The position of the output within the transaction's list of outputs.

5) Transaction Verification: When a user initiates a transaction, the blockchain network verifies whether the inputs (UTXOs) used in the transaction are valid and unspent. This process ensures that users cannot double-spend their cryptocurrency by using the same UTXO in multiple transactions.

6) UTXO Sets: The UTXO set refers to the collection of all unspent transaction outputs across the entire blockchain network. This set is constantly updated as new transactions are confirmed and spent outputs become unspent.

Examples of UTXO-based Cryptocurrencies

Bitcoin (BTC)
Litecoin (LTC)
Dash (DASH)
Dogecoin (DOGE)

In summary, UTXO plays a critical role in the transactional model of blockchain networks, enabling secure and efficient transfer of cryptocurrency while preserving user privacy and preventing double-spending. Understanding UTXO is essential for anyone looking to delve deeper into the mechanics of blockchain technology and cryptocurrencies.

Image source: Unchained