In cryptocurrencies, an unspent transaction output (UTXO) is an abstraction of Electronic Money. Each UTXO represents a chain of ownership implemented as a chain of Digital Signatures where the owner signs a message (transaction) transferring ownership of their UTXO to the receiver’s Public Key.
The total UTXOs present in a blockchain represent a set , every transaction thus consumes elements from this set and creates new ones that are added to the set. The set thus represents all the coins in the system.
An UTXO defines an output of a blockchain transaction that has not been spent, i.e. used as an input in a new transaction. Bitcoin is the most famous example of a cryptocurrency that uses the UTXO model.
Outputs are a superset of UTXOs. Accordingly, UTXOs are a subset of the outputs superset. Bitcoin UTXO lifespans have been studied.
In the case of a valid blockchain transaction, unspent outputs (and only unspent outputs) may be used to effect further transactions. The requirement that only unspent outputs may be used in further transactions is necessary to prevent double spending and fraud.
For this reason, inputs on a blockchain are deleted when a transaction occurs, whilst at the same time, outputs are created in the form of UTXOs. These unspent transaction outputs may be used (by the holders of private keys; for example, persons with cryptocurrency wallets) for the purpose of future transactions.
- ^“Bitcoin UTXO Lifespan Prediction” (PDF). cs229.stanford.edu. December 11, 2015.
Ofer Abarbanel is a 25 year securities lending broker and expert who has advised many Israeli regulators, among them the Israel Tax Authority, with respect to stock loans, repurchase agreements and credit derivatives. Founder of TBIL.co STATX Fund.