Understanding the UTXO Model in Crypto

Despite the rapid growth rates in crypto adoption, many of the essential terms sound like jargon to many investors. That is quite unfortunate since several of them may serve as crucial indicators for various aspects of the respective coin. It is only fair that these terms are explained in depth. UTXO is one such term. Read to understand more about that terminology as used in crypto. A Brief on UTXO UTXO is an abbreviation of Unspent Transaction Output. It is a more technical wording for the amount of crypto left behind after a transaction is executed. One can link it to the pocket change they get after purchasing a good using a higher note value. However, a key difference is that, unlike change, UTXO is not in a lower denomination value. What it represents is a blockchain network-generated, database-based transaction output. It plays the primary role of enabling non-exact transactions, transactions that aren’t in whole numbers of a crypto coin. In simpler words, all UTXO amounts are recorded in a database as reusable inputs for new transactions. Explanation Using a Sample Transaction The assumption used for this sample transaction is that the price of 1BTC is $40,000. If a transaction involving goods worth $30,000 is executed and the buyer prefers to pay via BTC, only 0.75BTC will be required. Assuming the buyer does not need more BTC, They will buy the exact 0.75BTC needed from the network and transfer it to the seller’s acco...