What is UTXO?
This is a simple introduction into UTXO model. Understanding what is UTXO is a first step on becoming a true UTXO Beast. So, let’s dive right in!
Imagine that you have 100$ in banknotes and want to pay your friend 20$. You let a beast eat all your banknotes, which destroys them. Luckily, when a beast eats something, it also produces something new. In this case the beast creates two new banknotes. One valued at 20$ that goes to your friend and another, valued at 80$ that goes back to you. What happened here? The beast ate all your 100$ worth of banknotes and returned two new banknotes in exchange. One 20$ that went to your friend and one 80$ that worked like a change for you. Sounds familiar, right? You do this all the time in grocery store. Well, you did while cash was a thing. The only difference is that your original 100$ were destroyed and instead, totally new banknotes were created from them. If any banknote gets spent (eaten by the beast), it’s gone forever. Therefore, each banknote can only be spent once.
All such banknotes are called UTXOs. It’s an acronym for “unspent transaction output”. Why? The beast together with your original 100$ and with the new 80$ and 20$ banknotes is called a transaction. Your original 100$ are called transaction inputs (because they go into the beast) and the new 80$ and 20$ are called transaction outputs (because they fly out of the beast). Does the UTXO acronym make sense now?
Well, in reality, each banknote is associated with some more data. Therefore, instead of just a banknote, we could imagine a UTXO as box. In that box, there is some $ value and some additional data that we will examine in a future article. So, this is how a transaction could look like. The UTXO Beast eats and destroys transaction inputs and creates transaction outputs:
What’s cool about this? You are the one feeding the beast, so you decide which of your UTXOs it will eat and you can tell it exactly what new UTXOs it should produce as long as the value of new boxes is the same as the value of destroyed ones. This way, you can feed the beast with a 100$ UTXO and tell it to produce a 10$ UTXO for your cousin, a 30$ UTXO for a friend, a 40$ UTXO for taxman and a 20$ UTXO that goes back to you as a change. You just paid 3 different people. In a single transaction! Isn’t that amazing? This would take 3 transactions in account-based model.
We are UTXO Beastz, a CNFT project bringing education to the space. Stay tuned for next articles and follow us on Twitter if you’re interested. We would highly appreciate that! If you have any questions or need help with anything, stop by in our Discord and talk to us. We’ll be happy to help you. Thanks for reading!
