A transaction- UTXO’s, new output(s), input(s) and previous output(s).

A transaction locks value (bitcoin) to an address or a script. It does this by creating new output(s) (also referred to as (UTXO’s, Unspent Transaction Outputs), by creating input(s) onto the respective receiving address.
  • An address “locks” value (bitcoin) to be spent.
Say, a given address receives five deposits which consist of: 0.1, 0.2, 0.3, 0.4 and 0.5 BTC, respectively.
The address now holds a combined value of 1.5 BTC consisting of the five individual deposits. These individual deposits are UTXO’s, or new outputs, which means that the owner of the address in question now has five new outputs at his disposal.
New outputs are Bitcoin’s version of deposits available to be spent.
The owner of the address above now decides to deposit his bitcoin onto another address, thus creating a new output through an input onto the respective receiving address, but what is, or does, an input do?
An input refers to the process of creating a new output, that includes specifying which of the available UTXO’s are to be spent on new outputs, creating a chain-of-ownership, and authorizing the transaction with the owner’s digital signature, thus providing proof-of-ownership as well as signing the new output(s) with the input’s specific script signature, thereby ensuring that the new output(s) can’t be changed on a later stage.
  • Each transaction is signed by the owner through a digital signature, which is achieved by applying the private key to the transaction data, which produces a numerical signature; this numerical signature is referred to as a “digital signature”.
  • UTXO’s are able to be poured into new UTXO’s with bigger or smaller values, for example: two UTXO’s of 0.1 and 0.2 BTC respectively, are poured together into one UTXO of 0.3 BTC.
  • Each UTXO requires its own signature.
The UTXO’s spent in the above transaction are now referred to as previous outputs, since they don’t hold any spendable value anymore.
Transactions also receive an identification number, referred to as a TXID (Transaction ID), which is created through hashing a transaction’s transaction data (the respective inputs and outputs) twice through the SHA256-function.
I've been getting positive feedback, but I'm not exactly sure... What do y'all think, and how could I define- and streamline it further?
I like to compare a UTXO to a fiat "note" but without defined denominations. If you want to pay someone, you need to gather up enough notes (inputs) to pay (outputs) plus fee (mining). Usually, you'll have sats left, so you'll need another note paid to yourself (change output).
Also, each input in the tx needs it's own signature/script in order to be spent.
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Hm, I've got all that covered except for the mining fees + change output, but I knew about that already, sharp.
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Each transaction is signed…
This is not semantically correct. My 2nd point is that each input needs their own signatures for a tx to be valid.
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Because each transaction can consist of multiple UTXO's, which each have to be signed, gotcha.
0 sats \ 3 replies \ @xz 20 Feb
Without trying to give my own interpretations and not being at a technical level high enough to comment and help/accurately verify your words, there was a similar thread where someone mentioned melting chocolate, I thought it was a good metaphor.
I heard a pod where someone mentioned another metaphor for UTXOs. Was like this. Your wallet is pretty much like a physical wallet, you can have many wallets or just one, if you find that more practical. In each wallet there's probably different places to store bills and change. Paper bills and loose change (coins) are like your UTXO sets, I guess the place where you find them is like an address.
Things is, like physical cash in your wallet, you transact with denominations (your UTXOs) and usually in this scenario you get change. Exactly the same.
So, I think you are pretty much right.. without attesting to technicalities.
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Hm, thanks.
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0 sats \ 1 reply \ @xz 20 Feb
I know that's not very helpful ;-)
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Well, it's positive feedback, I'll take it.
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