What Is A UTXO?

A UTXO is the residual BTC (sats) after a transaction occurs within the Bitcoin network. Think of it like transacting with cash: you hand over a bill, and you get change in return. When you use a UTXO, it has to be consumed entirely. For instance, if you utilize a 0.0038 BTC UTXO (equivalent to $100 at current rates) to transfer 0.002 BTC, the entire 0.0038 BTC gets processed. Of this, 0.002 BTC goes to the recipient, and the remaining amount (after deducting any transaction fees) returns to you as a new UTXO. Every UTXO is meticulously recorded and authenticated on the blockchain, ensuring secure and transparent transactions while preventing double-spending. The UTXO mechanism mirrors how we deal with tangible coins of specific denominations, yet, unlike physical coins, UTXOs can encapsulate any bitcoin amount.