UTXO (Unspent Transaction Output)

A UTXO, short for unspent transaction output, is the accounting unit used by Bitcoin and similar chains. Instead of holding a running balance, an address controls a set of discrete outputs left over from earlier transactions, rather like individual banknotes. Spending consumes whole outputs as inputs and creates new ones: usually one to the recipient and one returning change to the sender. A wallet balance is simply the sum of the UTXOs it can spend. The model makes transaction graphs easy to trace and lets nodes validate a spend without replaying an account history, but it also means fees depend on how many inputs a transaction has to include. Ethereum-style chains use account balances instead.