Unspent transaction output

In cryptocurrencies such as Bitcoin, an unspent transaction output (UTXO) is an abstraction of electronic money. Each UTXO is analogous to a coin, and holds a certain amount of value in its respective currency. Each UTXO represents a chain of ownership implemented as a chain of digital signatures where the owner signs a message (transaction) transferring ownership of their UTXO to the receiver's public key.

A UTXO defines an output of a blockchain transaction that has not been spent, i.e. can be used as an input in a new transaction. Bitcoin is an example of a cryptocurrency that uses the UTXO model.

The UTXO Model

The UTXO model is a design common to many cryptocurrencies, most notably Bitcoin. Cryptocurrencies which use the UTXO model do not use accounts or balances. Instead, individual coins (UTXOs) are transferred between users much like physical coins or cash.[1]


The UTXO Set

The total UTXOs present in a blockchain represent a set, every transaction thus consumes elements from this set and creates new ones that are added to the set. The set thus represents all the coins in the system. The complete UTXO set can be summed to calculate the total supply of a cryptocurrency at a given point in time.[2]

Outputs are a superset of UTXOs. Accordingly, UTXOs are a subset of the outputs superset. Bitcoin UTXO lifespans have been studied.[3]

In the case of a valid blockchain transaction, unspent outputs (and only unspent outputs) may be used to fund further transactions. The requirement that only unspent outputs may be used in further transactions is necessary to prevent double-spending and fraud.

For this reason, inputs on a blockchain are removed from the UTXO set when a transaction occurs, whilst at the same time, outputs create new UTXOs, which are added to the UTXO set. These unspent transaction outputs may be used (by the holders of private keys; for example, persons with cryptocurrency wallets) for the purpose of future transactions.

Origins

The UTXO model can be attributed to Hal Finney's Reusable Proof-of-Work proposal,[4] which itself is based on Adam Back's 1997 Hashcash proposal.[5]

See also

References
  1. "Unspent Transaction Output (UTXO)". river.com/learn/. December 15, 2020.
  2. "UTXO Set". river.com/learn/. December 15, 2020.
  3. "Bitcoin UTXO Lifespan Prediction" (PDF). cs229.stanford.edu. December 11, 2015.
  4. "Reusable Proofs of Work". nakamotoinstitute.org. August 16, 2004.
  5. "Hashcash - A Denial of Service Counter-Measure". hashcash.org. March 28, 1997.


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