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21 sats \ 0 replies \ @0xIlmari 6 Jan \ on: How do you explain UTXO to normies? bitcoin
If you liken Bitcoin to gold, then a UTXO is a concrete piece of gold. The blockchain is an unambiguous record of:
- precisely how much bitcoin is in that piece (the "weight" in sats)
- who owns it (albeit pseudonymously; also, may be multiple entities via multisig)
- under what conditions can it be "spent" (such as timelocks, or how many of a multisig are required)
The only thing you can do with a piece of bitcoin is to "spend" it, that is move it(*) to a different owner. In that process, you can freely "cut" it into more pieces of arbitrary size, and send each one wherever you want (including yourself, a.k.a. "change").
You can also combine multiple pieces into one (consolidation) or join other owners in a transaction where you "melt" your pieces together and create a bunch of different pieces (CoinJoin), somewhat obscuring the trail of money.
(*) Technically, pieces are not actually moved. When a transaction is recorded, all pieces ("inputs") contributing to it are considered to be "spent"/consumed/destroyed and as such cease to exist. A transaction then produces new pieces (the "outputs") whose total size is equal to the total size of inputs (minus miner fees).