The Concept of Inputs, Outputs, and UTXO?
A Bitcoin wallet is a virtual wallet that does not contain bitcoin in physical form. These wallets are a record of transactions executed for a particular cryptocurrency.
While sending bitcoin to someone it is proof of work that you have done a transaction and in return, you have an account balance in your wallet. This means you are now able to spend your coins in exchange or return for any services.
The process of sending coins to an address of a blockchain is a way to gather some of its outputs and transform them into the form of transaction input. The receiving address will be considered the output of the transaction. The excess coins can be sent back to your address which is known as unspent transaction output (UTXO). Further, you can register today to get started.
Why does Inputs, Outputs, and UTXO are necessary for crypto exchange
As Bitcoin is a catalogue of transactions. The bitcoin which you receive at your address is called a bill of the transaction output. Similarly, inputs come from your transaction outputs when you forward your bitcoin to someone else. And the unused transactions which remain after the transaction are known as Unspent transaction outputs (UTXO) so that you could have a positive account balance.
How does a transaction be execute
During this preparation of the transaction, some methods must be adopted. Try to execute these calculations by yourself. Although wallets are self-protective regardless of who is pursuing them. Hence there are some plans to be executed:
- Plan execution → Pre-decide the amount how much you should spend on the address of the sender along with the recipient’s addresses. Both entities can be similar. Hence it is the right to merge small UTXOs in terms of larger ones to clear the wallet of excess change.
- Input concept → Now decide to gather any one of the UTXO accounts. However, the positive numbers of the same would do UTXOs as the bitcoins are already high in count ads compared to the amount you wish to spend. Thus, the selection output represents this transaction’s input.
- Output concept → try to execute two number of transactions which means the output of both the recipient address as well as the output to the wallet which is sending the transaction and return of the excess coins are returned from the output under the wallet of your own. overlaying that the amount of output should be less than your input.
- Fee applicable→ if we consider the remaining transaction charges which is an output that was received at the miner’s address. If the output is very small, the transaction will automatically be stopped. In addition to this, if the unspent amount of crypto coins remains that should be excess back to your address, fortunately, it will be claimed by the crypto miners.
An example of a transaction
Michel is contained three numbers of UTXO in their wallet. However, his wish to send the number of Bitcoins is 6 only. But the problem is that he cannot deduct 6 bitcoins directly from his balance. But he would have to use the outputs as well.
Now Michel has to tell the exact address where he could send his 6 Bitcoins. He put a duty on a variety of his UTXOs that is at least 6 BTC in whole. He could go for 4 + 5, 5+ 7, or 4 + 7. But Michel needs to take out as much change as possible so that he goes for 4 + 5 + 6. The miners noticed a fee has been enclosed to this transaction and further added to the block.
The UTXO database
The UTXO database is a database that contains all coin’s data as contained in it. As the transaction completes, the inputs and output get compared in the UTXO database to avoid double expenditure. The verifier however must make sure that the transaction has not been executed twice. Moreover, verifiers do not need to cross-check the earlier output in the database of UTXO. For this, there is no need to browse the history of UTXO because as the output can see in the UTXO database, that is a statement to prove that transactions have occurred.
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